Verona Pharma: FY 2012 Results
2012 OPERATIONAL HIGHLIGHTS
• Dr. Jan-Anders Karlsson appointed as the Company’s Chief Executive Officer on 1 June 2012, as successor to Professor Michael Walker.
• Clinical trial initiated to test the anti-inflammatory properties of the Company’s lead drug, RPL554, with respect to COPD at the Medicines Evaluation Unit (MEU) in Manchester, UK.
• New patent granted for RPL554 by the US Patent and Trademark office. The Patent is the fourth patent issued for RPL554 and related compounds in the US.
• Clinical data presented on the bronchodilator effects of RPL554 in patients with COPD at the European Respiratory Society (ERS) annual congress in Vienna.
• Clinical data presented on the bronchodilator effects of RPL554 in asthmatic patients at the International Severe Asthma Forum (ISAF) 2012 meeting in Gothenburg, Sweden.
2012 FINANCIAL HIGHLIGHTS
• Loss after tax of £2.52m (2011: £1.72m) or 0.82 pence (2011: 0.71 pence) per ordinary share.
• Net cash outflows from operating activities during the year of £2.57m, with cash and cash equivalents as at 31 December 2012 of £0.96m (2011: £2.53m).
POST PERIOD HIGHLIGHTS
• Completed a £1.1m share placing and entered into a £5m equity financing facility with Darwin Strategic Limited to provide access to finance ongoing clinical development of the RPL554 and VRP700 programmes and for general corporate purposes.
• Substantial anti-inflammatory effect in COPD-like inflammation demonstrated in clinical study with RPL554 at MEU, Manchester.
Dr. Jan-Anders Karlsson, CEO of Verona Pharma commented, “We are very pleased by the clinical successes achieved to date in the development of both RPL554 and VRP700. While we remain excited by these unique drugs’ broad potential in the treatment of respiratory diseases, the Board’s refined strategy for the Company focuses us on developing RPL554 to treat patients with severe COPD, and VRP700 to treat chronic, severe cough. It is the Board’s view that this focus on significant unmet market needs will potentially shorten the path to commercialisation and afford the greatest opportunity of accelerating shareholder value.”
INTRODUCTION
Verona Pharma is a development stage company focused on novel, “first-in-class” drugs for patients suffering from respiratory diseases with high unmet medical need.
In the second half of 2012, the Board undertook a comprehensive review of the Company’s strategy with the objective of accelerating shareholder value creation. While it was decided to retain a focus on “first-in-class” medicines to treat respiratory diseases, there is now an increased emphasis on optimising value by concentrating initially on therapeutic indications with a clear path to commercialisation and a high unmet medical need. At a later stage, we will seek to widen the use of our medicines via novel formulations and further indications. The Board believes that targeting patients with high unmet medical need will accelerate access to multi-billion dollar commercial markets and increase the flexibility in the timing for achieving attractive commercial partnerships.
Verona Pharma has demonstrated that its lead compound, the dual phosphodiesterase 3 and 4 inhibitor RPL554, is well tolerated and delivers clinically significant bronchodilation in patients with COPD or asthma, and has a unique mechanism of action providing both bronchodilator and anti- inflammatory effects which are expected to be complementary or alternative to existing treatments.
In the revised strategy, the Company plans to bring RPL554 to market with speed and focus. Therefore, it is developing a nebulised formulation of RPL554 as a bronchodilator for patients with severe COPD. COPD is one of the most common lung disorders. Despite regular treatment, these patients currently cost the NHS about £1 billion per annum and around 23,000 patients die every year. COPD is common not only in the UK, but in the rest of the world, and WHO expects this to be the third most common cause of death worldwide by 2020. Patients with severe COPD are not well controlled on existing treatments and RPL554 has potential to be a novel therapy for these patients. To the best of the Company’s knowledge, there is no new treatment in development in the same class of drugs, thereby providing RPL554 a unique competitive positioning.
Verona Pharma has also demonstrated that VRP700 has significant anti-tussive activity in the treatment of chronic, severe cough. Cough is the most common symptom in many lung diseases and existing treatments have limited activity. VRP700 has a unique mechanism of action that is different from currently available treatments and, as far as the Company is aware, there are no compounds in development in the same class as VRP700, thereby providing a favorable competitive and commercial position. The Company will therefore continue to develop VRP700 for chronic, severe cough.
RPL554
RPL554 is a dual phosphodiesterase 3 and 4 inhibitor that was selected for clinical development as pre-clinical studies had demonstrated both potent bronchodilator and anti-inflammatory properties. RPL554 is currently being developed as a potential “first-in-class” treatment for patients with chronic respiratory diseases such as COPD and asthma.
RPL554 has successfully passed through a number of early clinical Phase I and II studies. These single and multiple dose studies suggest that RPL554, when inhaled across a range of doses, is an effective bronchodilator in patients with COPD or asthma and is an excellent candidate for further development as a new class of bronchodilator.
The clinical trial with RPL554 in patients with mild to moderate COPD at the Tor Vergata Clinic at the University of Rome was expanded during the reporting period to incorporate more patients to provide further data. Consistent with the initial part of the study completed in 2011, the magnitude of bronchodilator response produced by the drug was significantly larger than that produced by placebo and appeared to be at least equivalent to that produced by a standard dose of the reference bronchodilator beta2-agonist salbutamol in these patients. Importantly, no safety issues were observed. The data from the trial were reported in an oral presentation by the Principal Investigator, Professor Mario Cazzola, at the European Respiratory Society Annual Congress in Vienna on 4 September 2012.
A separate randomized, double blind, placebo-controlled clinical trial to examine the potential anti-inflammatory effects of RPL554 was conducted at MEU in Manchester during the last year. The trial was conducted in healthy subjects, treated once daily for 6 consecutive days with either inhaled RPL554 or inhaled placebo before being challenged on the last day by an irritant agent that provokes an inflammatory response in their airways.
The primary end point chosen for this exploratory trial was a reduction in the proportion of neutrophil cells, an inflammatory cell type recognised for its central role in COPD and severe asthma, to total inflammatory cells in the sputum, and secondary endpoints included reductions in total inflammatory cell numbers. While there was a strong trend in favour of the primary endpoint, the study narrowly missed reaching statistical significance even though there was a highly significant reduction in the absolute number of neutrophils.
The total number of inflammatory cells in the airways was reduced by over 30% when normalized for sample weight. Furthermore, certain types of inflammatory cells, including neutrophils, macrophages, lymphocytes and eosinophils, were reduced by up to around 75% (normalized for sample weight). Most important in this study however, was the demonstration of a broad and pronounced anti-inflammatory effect after short term (one week) treatment.
The clinical data obtained for RPL554 to date indicate that the drug has a unique combination of bronchodilator and anti-inflammatory properties. Importantly, RPL554 was well tolerated and, consistent with earlier clinical studies, there were no clinically significant cardiovascular or gastrointestinal side effects. The Company plans to continue the development of RPL554, initially as a nebulised drug for severe COPD patients.
VRP700
Cough is the most common symptom of lung disease. Chronic cough of more than eight weeks duration can be a debilitating symptom when associated with severe lung diseases such as asthma, COPD, interstitial lung disease and lung cancer. Unfortunately, currently available cough remedies are recognised as being relatively ineffective, often with significant side effects. There is no novel and effective therapy for treating the severe, dry cough in patients with interstitial lung disease, pulmonary fibrosis or lung cancer. The Company is initially evaluating VRP700 as a possible novel “first-in-class” treatment in patients with chronic cough due to severe lung disease.
During the reporting period, the clinical trial of VRP700 at the University of Florence, Italy that was completed in the second half of 2011 was further analyzed. In this study, inhalation of VRP700 for about 10 minutes very effectively reduced chronic cough in a small group of patients with various forms of severe lung disease. As the result of the study was very positive, a follow-on study in patients with severe, chronic cough due to a different type of underlying lung disease is being planned. Preparations for such study are nearing completion and the study is expected to start in the first half of 2013 with results expected in the first half of 2014.
NAIPs
The Company undertook limited work on the NAIPS programme during the reporting period. This is in line with the Company’s primary objective to focus its resources on the clinical stage assets RPL554 and VRP700. However, three new patent filings have been made to secure ownership and intellectual property around these novel anti-inflammatory principles.
FINANCIALS
The loss from operations for the year ended 31 December, 2012 was £2.52m (2011: £1.72m). Research and development expenditure, which was expensed as incurred, amounted to £1.67m (2011: £0.94m). The increase in research and development expenditure was primarily due to an increase in the expenditures on the RPL554 programme by £0.56m to £1.31m (2011: £0.75m) and the VRP700 programme by £0.25m to £0.35m (2011: £0.10m). The increase in expenditures on the RPL554 programme was primarily due to: (a) cost associated with the clinical trial at MEU in Manchester to test the anti-inflammatory properties of RPL554 with respect to COPD; and (b) nebulised formulation development with the aim to improve delivery. The increase in expenditures in the VRP700 programme was due to: (a) an increase in the scope of development of the VRP700 series; and (b) cost associated with preparation for the planned confirmatory anti-cough study.
Administrative expenses for the year were £0.91m (2011: £0.90m). The marginal increase of £0.01m over the previous period was primarily due to an increase in general corporate overhead which was partly offset by a decrease in the share-based payments charge.
As at 31 December 2012, the Company had approximately £0.96 million in cash and cash equivalents.
On 31 January 2013, the Company announced that it had raised £1.1 million (gross) from a placing of new shares, and entered into a £5.0 million equity financing facility with Darwin Strategic Limited, a company majority owned by a subsidiary of Henderson Global Investors. In order to fund the future development of the RPL554 and VRP700 programmes, it is expected that the Company will either draw down on such facility or secure financing from other sources.
OUTLOOK
Taking into account the progress achieved in the development of RPL554 and VRP700 and the significant unmet medical need in respiratory diseases, the Board has refined the Company’s strategy to focus initially on developing RPL554, with nebulised delivery, to treat patients with severe COPD, and on developing VRP700 to treat chronic, severe cough. It is our view that this focus on significant unmet market needs will afford the greatest prospect of accelerating shareholder value growth.
To implement this revised strategy, the Board has considered it necessary to strengthen the Company’s later stage development capabilities. The Company has therefore recently engaged experienced consultants with indepth expertise in developing and bringing new medicines to market, especially novel inhaled treatments for lung disease such as asthma and COPD. The recently demonstrated significant anti-inflammatory properties of RPL554 in human subjects supports its use in a wider group of patients, and whilst bronchodilation represents the near term focus of Verona Pharma, the Company intends in due course to broaden the therapeutic use of RPL554, including its anti-inflammatory potential and potential for the treatment of asthma.
The dual bronchodilator and anti-inflammatory properties of RPL554 sets it apart from the most commonly used medications for COPD and asthma that have predominantly bronchodilator (beta2 agonists or anti-muscarinic drugs) or anti-inflammatory (inhaled glucocorticosteroids, oral phosphodiesterase4 inhibitor) activities. Thus, RPL554 is the first in a new class of respiratory drugs that combines two important activities in one molecule and therefore may provide unique benefits to patients with respiratory disorders.
The Company believes that RPL554 ultimately has the potential to benefit a much wider group of patients and to be used either alone or in combination with existing medicines. The Company recognises that an experienced and resourceful commercial partner could bring significant value to the development of RPL554 and therefore continues to be involved in business development discussions around the RPL554 programme. However, the Company intends to partner its drug candidates only when it can extract a commercially attractive return for the Company and its Shareholders.
It is recognized that there is a desire for more data around RPL554 in the scientific and medical community and, to that end, the Company will publish and present new pre-clinical and clinical data around RPL554 in scientific meetings in 2013.
The Company will continue to operate with a strong focus and financial discipline. The Company continues to be very positive about its progress to date and its future and looks forward to updating the market on further developments in due course.
Professor Clive P. Page Dr. Jan-Anders Karlsson
Chairman Chief Executive Officer