TIDMVRP
Completed $200 million private placement post period
Phase 3 COPD clinical trials planned to start later this year
Pilot clinical study in patients hospitalized with COVID-19 planned to
start in the third quarter
Conference Call Today at 9:00 am EDT / 2:00 pm BST
LONDON and RALEIGH, N.C., Aug. 14, 2020 (GLOBE NEWSWIRE) -- Verona
Pharma plc (AIM: VRP) (Nasdaq: VRNA) ("Verona Pharma" or the "Company"),
a clinical-stage biopharmaceutical company focused on developing and
commercializing innovative therapies for respiratory diseases, announces
financial results for the three and six months ended June 30, 2020 and
provides a corporate update.
"We have made significant progress in the second quarter and are
extremely pleased to have raised $200 million from a group of highly
experienced life science investors in July," said David Zaccardelli,
Pharm. D., President and Chief Executive Officer. "Following the
financing and the positive response from the U.S. Food and Drug
Administration ("FDA") to our End-of-Phase 2 briefing package in May, we
are on schedule to initiate our ENHANCE (Ensifentrine as a Novel inHAled
Nebulized COPD thErapy) Phase 3 clinical trials with nebulized
ensifentrine for the treatment of chronic obstructive pulmonary disease
("COPD") later this year.
I am also pleased to announce that we have received a notice to proceed
for our Investigational New Drug ("IND") from the FDA to study
ensifentrine in patients with COVID-19. We plan to initiate a randomized,
double-blind, placebo-controlled pilot clinical study to evaluate
ensifentrine delivered via pressurized metered-dose inhaler ("pMDI")
formulation as a treatment for patients hospitalized with COVID-19 at
the University of Alabama at Birmingham. Clinical data from prior
studies of ensifentrine in other respiratory diseases have demonstrated
ensifentrine improves lung function and reduces cellular markers of
inflammation in the lungs. We believe ensifentrine, with its novel
mechanism of action, has the potential to improve oxygenation and lung
function assisting recovery from COVID-19.
To date, the impact of COVID-19 on clinical development programs has
been limited, but we continue to monitor the situation and have put in
place mitigation strategies to reduce the risk of COVID-19 related
delays. In March, due to the pandemic, we postponed the start of the
second, multiple dose, part of the Phase 2 study with the pMDI
formulation of ensifentrine in patients with moderate to severe COPD. I
am pleased to report that we now plan to initiate the second part of
this study in the third quarter of 2020 with results anticipated in the
first half of 2021."
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 relief for patients suffering from respiratory conditions such
as COPD, cystic fibrosis ("CF"), asthma, as well as patients suffering
from COVID-19.
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.
In the first quarter results, Verona Pharma outlined the Company's key
objectives for 2020:
-- Completing an End-of-Phase 2 meeting with the FDA in the second quarter
of 2020 to receive guidance on the design of the Phase 3 program with
nebulized ensifentrine
-- Securing sufficient capital to fund the Phase 3 program for nebulized
ensifentrine
-- Initiating the Phase 3 program with nebulized ensifentrine in moderate to
severe COPD patients
Verona Pharma is pleased to have met the first two objectives, obtaining
clarity from the FDA on important features of the pivotal Phase 3
clinical program and securing $200 million ($183 million net of
commissions and expenses) through a private placement. The Company is on
track to meet the third objective as it plans to start the Phase 3
program with nebulized ensifentrine in COPD later this year.
OPERATIONAL AND DEVELOPMENT HIGHLIGHTS FOR THE THREE AND SIX MONTH
PERIODSED JUNE 30, 2020
Financial
-- In July, the Company completed a $200 million (GBP159 million) private
placement of American Depository Shares ("ADSs") and ordinary shares that
resulted in net proceeds of approximately $183 million (GBP145 million)
after giving effect to transaction related fees and expenses ("Private
Placement"). The Company expect the proceeds of the Private Placement to
be sufficient to support its operations and clinical programs into 2023
including the Phase 3 ENHANCE program with nebulized ensifentrine for the
treatment of COPD, which is expected to start later this year.
Clinical
-- In May, the FDA provided written comments in response to the Company's
End-of-Phase 2 briefing package for nebulized ensifentrine as a
maintenance treatment for COPD. The response supports progressing the
Phase 3 program, ENHANCE, to support a New Drug Application and the
Company is preparing to initiate the clinical studies later in 2020. The
two randomized, double-blind, placebo-controlled studies (ENHANCE-1 and
ENHANCE-2) will evaluate the efficacy and safety of nebulized
ensifentrine as monotherapy and as an add-on to standard of care
treatment with a single bronchodilator. Each study will enroll
approximately 800 moderate to severe, symptomatic COPD patients at sites
primarily in the U.S. and Europe. The two study designs are essentially
identical over 24 weeks, but ENHANCE-1 will also evaluate longer-term
safety in 400 patients over 48 weeks.
-- Additionally in May 2020, six abstracts presenting findings from clinical
trials with ensifentrine for the treatment of COPD were accepted by the
American Thoracic Society International Conference ("ATS") 2020. The
abstracts were published on the ATS website and in the peer reviewed
publication, American Journal of Respiratory and Critical Care Medicine.
The presentations included a late-breaking abstract that expanded on the
Phase 2b efficacy and symptom data first announced by the Company in
January 2020 where nebulized ensifentrine added on to tiotropium
demonstrated clinically and statistically significant dose-dependent
improvements in lung function as well as COPD symptoms.
-- In June 2020, the Company hosted an "Investor and Analyst KOL Webcast" to
provide insights into the unmet medical need and challenges of treating
COPD, as well as details of the planned Phase 3 ENHANCE program. The
forum featured a panel of leading U.S. respiratory clinicians who spoke
about the urgent need for a new COPD treatment with a different mechanism
of action that better addresses symptoms and offers greater benefits to
patients.
-- In July 2020, the Company received a notice to proceed from the FDA to
evaluate pMDI ensifentrine in a randomized, double-blind,
placebo-controlled pilot clinical study for the treatment of patients
hospitalized with COVID-19. The Company plans to start the study in the
third quarter.
Management
-- In June 2020, the Company appointed a U.S. commercial expert, Christopher
Martin, as Vice President of Commercial. He will lead the Company's
commercialization efforts for ensifentrine. Mr. Martin brings more than
15 years of commercial experience spanning sales, marketing and business
development. Previously, he served as Executive Director of Marketing at
SK Life Science, a subsidiary of SK Biopharmaceutical, where he was
instrumental in launching the company's first commercial product, an
anti-epileptic medication. Mr. Martin previously worked with Verona
Pharma's Chief Executive Officer and Chief Financial Officer, David
Zaccardelli and Mark W. Hahn respectively, at Cempra. Mr. Martin is based
in the Company's U.S. office in Raleigh, North Carolina.
THREE MONTHSED MARCH 31, 2020
-- In January 2020, the Company reported positive top-line data from a Phase
2b clinical study with nebulized ensifentrine added on to tiotropium
(Spiriva(R)), a long acting anti-muscarinic ("LAMA") bronchodilator in
symptomatic patients with moderate to severe COPD. The study met the
primary endpoint at all doses and also met clinically relevant secondary
endpoints.
-- In February 2020, the Company published its Phase 2b clinical results
with nebulized ensifentrine as a monotherapy for maintenance treatment of
COPD in the peer reviewed journal, Respiratory Research. The 403-patient
trial, reported in March 2018, was the first of two large Phase 2b trials
with nebulized ensifentrine for this indication. The study met its
primary endpoint demonstrating that ensifentrine produced clinically and
statistically significant improvements in lung function at all doses. In
addition, clinically relevant secondary endpoints were met including
significant progressive improvements in COPD symptoms.
-- In March 2020, the Company reported positive efficacy and safety data
with a single dose of the pMDI formulation of ensifentrine in a Phase 2
clinical trial in patients with moderate to severe COPD. With these
results and those observed in previous Phase 2 clinical trials,
ensifentrine has demonstrated statistically significant and clinically
meaningful improvements in lung function in COPD patients when delivered
via any of the three widely used inhaled modes: nebulizer, DPI and pMDI.
Results from the single dose part of the study (Part A) demonstrated a
statistically significant and clinically meaningful increase in lung
function as measured by FEV11 compared to placebo. The positive data
supported initiation of the second, multiple dose, part of the study
(Part B), which will evaluate the pMDI formulation in this patient
population over 7 days of twice-daily treatment. Verona Pharma postponed
the initiation of Part B due to concerns regarding the safety of trial
subjects, caregivers and medical staff during the coronavirus (COVID-19)
pandemic, but following an assessment of the safety plans and procedures
put in place by the UK clinical trial site, the Company is planning to
initiate Part B of this study in the third quarter of 2020.
-- Also, during the first quarter of 2020, the Company requested an
End-of-Phase 2 meeting with the FDA for nebulized ensifentrine as a
maintenance treatment for COPD.
FINANCIAL HIGHLIGHTS
-- Net cash, cash equivalents and short term investments at June 30, 2020,
amounted to GBP18.1 million ($22.4 million) (December 31, 2019: GBP30.8
million). In July 2020 the Company completed the Private Placement with
gross proceeds of approximately GBP159 million ($200 million). The net
proceeds of the Private Placement will be approximately GBP145 million
($183 million) after deducting placement agent fees and estimated
expenses.
-- For the six months ended June 30, 2020, the Company reported operating
loss of GBP19.7 million ($24.4 million) (six months ended June 30, 2019:
GBP19.8 million) and reported loss after tax of GBP16.9 million (six
months ended June 30, 2019: GBP14.4 million). Research and development
costs fell in the six months ended June 30, 2020, compared to the prior
period as the six months ended June 30, 2019, included significant costs
relating to a Phase 2b study. This fall was outweighed by higher general
and administrative costs in the 2020 period as it included costs relating
to executive changes and associated reorganization.
-- The Company reported loss per share of 16.0 pence for the six months
ended June 30, 2020 (six months ended June 30, 2019: 13.7 pence).
-- Net cash used in operating activities for the six months ended June 30,
2020 was GBP12.7 million ($15.7 million) (six months ended June 30, 2019:
GBP18.1 million). Cash used was lower as the GBP7.3 million tax credit
for the 2019 fiscal year was received in April 2020, and the GBP4.4
million tax credit for the 2018 fiscal year was received in August 2019.
-- The Company has 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, in the second
quarter of 2020 the Company recorded an increase of GBP22.6 million to
the contingent liability and a corresponding increase to the related
In-Process Research and Development asset. There is no material effect on
current period comprehensive loss, net assets or cashflows.
COVID-19 IMPACT AND BUSINESS CONTINUITY
To help protect the health and safety of the patients, caregivers and
healthcare professionals involved in its planned clinical trials of
ensifentrine, as well as its employees and independent contractors, the
Company plans 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 is continuing 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
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 planned 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 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 April 30, 2020.
(____________1) FEV(1) Forced Expiratory Volume in one second
Conference Call and Webcast Information
Verona Pharma will host an investment community conference call at 9:00
a.m. EDT / 2:00 p.m. BST on Friday, August 14, 2020 to discuss the Q2
2020 financial results and the corporate update.
Analysts and investors may participate by dialing one of the following
numbers and reference conference ID: 4180419:
-- 877-870-9135 for callers in the United States
-- +44 800 279 6619 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 30 days. An electronic copy
of the Q2 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.
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. Following a response from
the U.S. FDA to Verona Pharma's End-of-Phase 2 briefing package, the
Company plans to initiate its Phase 3 clinical program ENHANCE
(Ensifentrine as a Novel inHAled Nebulized COPD thErapy) later in 2020
for nebulized ensifentrine for COPD maintenance treatment. The Company
raised gross proceeds of $200 million through a private placement in
July 2020 and expects the funds to support its operations and Phase 3
clinical program into 2023. Verona Pharma is currently in Phase 2
development with two additional formulations of ensifentrine for the
treatment of COPD: dry powder inhaler ("DPI") and pressurized
metered-dose inhaler ("pMDI"). Ensifentrine also has potential
applications in cystic fibrosis, asthma, COVID-19 and other respiratory
diseases. For more information, please visit www.veronapharma.com.
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, 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 Annual Report on Form 20-F filed with the Securities and Exchange
Commission ("SEC") on February 27, 2020, under the caption "Supplemental
Risk Factor Disclosures" in our Report on Form 6-K filed with the SEC on
April 30, 2020, 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.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF
ARTICLE 7 OF REGULATION (EU) NO 596/2014
For further information please contact:
Verona Pharma plc Tel: +44 (0)20 3283 4200
Victoria Stewart, Director of Communications info@veronapharma.com
N+1 Singer Tel: +44 (0)20 3283 4200
(Nominated Adviser and UK Broker)
Aubrey Powell / George Tzimas / Iqra Amin (Corporate
Finance)
Tom Salvesen (Corporate Broking)
Optimum Strategic Communications Tel: +44 (0)20 3950 9144
(European Media and Investor Enquiries) verona@optimumcomms.com
Mary Clark / Eva Haas / Shabnam Bashir
Argot Partners Tel: +1 212-600-1902
(U.S. Investor Enquiries) verona@argotpartners.com
Kimberly Minarovich / Michael Barron
OPERATIONAL REVIEW
Company Overview
Verona Pharma is focused on developing and commercializing our
first-in-class, late-stage 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 also has
potential applications in cystic fibrosis, asthma, COVID-19 and other
respiratory diseases.
Nebulized ensifentrine is expected to start a Phase 3 clinical program
ENHANCE (Ensifentrine as a Novel inHAled Nebulized COPD thErapy) later
in 2020 for the maintenance treatment of COPD. Two additional
formulations of ensifentrine are currently in Phase 2 development for
the treatment of COPD: dry powder inhaler ("DPI") and pressurized
metered-dose inhaler ("pMDI").
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 U.S. alone, remain
symptomatic and urgently need additional treatment. We believe that
ensifentrine can provide significant benefits for these patients.
The pharmacological profile of ensifentrine, including its novel
mechanism of action complementary to existing classes, strong
improvement in COPD symptoms and unprecedented 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,
thereby minimizing 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 offers advantages to patients who may struggle to operate
handheld inhaler devices. Handheld inhaler formats may also be desirable,
and Verona Pharma has developed formulations of ensifentrine in dry
powder inhaler and pressurized metered dose inhaler formats,
successfully demonstrating proof of concept in COPD patients with these
formulations. An estimated 5.5 million people in the U.S. use pMDI or
DPI formulations delivered via handheld inhalers for COPD maintenance
treatment. The availability of these formulations of ensifentrine, if
successfully developed and approved, creates new opportunities for using
ensifentrine with existing inhaled medications. U.S. sales of pMDI and
DPI COPD maintenance medication were approximately $9 billion in 2019.
Management Update
Verona Pharma sees its initial market opportunity as the U.S. and in
June 2020, the Company appointed a U.S. commercial expert, Christopher
Martin, as Vice President of Commercial. He will help assess the market,
develop KOL relationships, and begin initial pre-commercialization
activities to support a potential U.S. launch of ensifentrine.
FINANCIAL REVIEW
Financial review of the six and three month periods ended June 30, 2020
Six months ended June 30, 2020
Research and Development Costs
Research and development costs were GBP12.1 million for the six months
ended June 30, 2020, compared to GBP15.8 million for the six months
ended June 30, 2019, a decrease of GBP3.7 million, predominantly
attributable to a GBP4.2 million decrease in clinical trial expenses. In
both periods there were costs relating to four clinical trials (ongoing,
in preparation or closing down) though in the six months ended 30 June
2019, there were significant costs relating to the Phase 2 four-week
trial studying ensifentrine as an add-on therapy to a long acting
bronchodilator. This outweighed the start-up costs for the ENHANCE
program that were incurred in the current period. Salary costs increased
by GBP0.4 million reflecting the expansion of the clinical team.
General and Administrative Costs
General and administrative costs were GBP7.6 million for the six months
ended June 30, 2020, compared to GBP4.0 million for the six months ended
June 30, 2019, an increase of GBP3.6 million. The increase was primarily
attributable to a GBP2.9 million increase in costs relating to executive
changes and costs associated with the closure of our New York office and
relocation of our U.S. base of operations to North Carolina. We booked
costs of GBP1.9 million relating to payments with respect to contractual
notice periods and other severance costs. There was a GBP0.2 million
impairment relating to the closure of the New York office and an
increase in the share based payment charge of GBP0.8 million for
Restricted Stock Units issued to new executive officers and accelerated
charges relating to severance agreements.
In addition there was a GBP0.5 million increase relating to Directors'
and Officers' insurance, and recruitment costs, professional fees and
other costs increased by GBP0.2 million.
Finance Income and Expense
Finance income was GBP0.5 million for the six months ended June 30,
2020, and GBP2.2 million for the six months ended June 30, 2019. The
decrease in finance income was primarily due to a smaller decrease in
the fair value of the warrant liability of GBP0.2 million compared to a
decrease of GBP1.7 million in the warrant liability during the six month
period ended June 30, 2019. Interest received on cash and short term
investments reduced by GBP0.4 million due to a lower cash balances held
and there was a GBP0.3 million increase in income booked in relation to
foreign exchange rate movements.
Finance expense was GBP0.4 million for the six months ended June 30,
2020, compared to GBP0.2 million for the six months ended June 30, 2019.
The increase was primarily due to a GBP0.4 million cost relating to the
unwind of the discount on the assumed contingent liability in the six
months ended June 30, 2020 compared to GBP0.1 million in the prior
period. There was also a GBP0.1m foreign exchange loss in the period
compared to a gain in the current period noted above.
Taxation
Taxation for the six months ended June 30, 2020, amounted to a credit of
GBP2.7 million compared to a credit of GBP3.4 million for the six months
ended June 30, 2019, a decrease of GBP0.7 million. The credits are
obtained at a rate of 14.5% of 230% of our qualifying research and
development expenditure. The decrease in the credit amount was
attributable to our decreased expenditure on research and development in
2020, compared to the prior period, and a change in the mix of
recoverable spend.
Assumed contingent liability and In-Process Research and Development
Asset
The Company has 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. In the second quarter
of 2020, the Company recorded an increase of GBP22.6 million to the
contingent liability and a corresponding increase to the related
In-Process Research and Development asset. There is no material effect
on current period comprehensive loss, net assets or cashflows.
Cash Flows
Net cash used in operating activities decreased to GBP12.7 million for
the six months ended June 30, 2020, from GBP18.1 million for the six
months ended June 30, 2019. While the operating loss in both periods was
similar and non-cash costs in the six months ended June 30, 2020, were
slightly higher, the cash used in operating activities in this period
was greater due to timing of supplier payments.
This increase in cash used in operating activities in the six months
ended June 30, 2020, was more than offset as the Company received GBP7.3
million in respect of its 2019 tax credit on qualifying research and
development in the period, whereas the 2018 tax credit of GBP4.4 million
was received in the quarter ended September 30, 2019. As a result, net
cash used in operating activities was lower in the current period
compared to the six months ended June 30, 2019.
The decrease in net cash generated in investing activities to GBP7.9
million for the six months ended June 30, 2020, from GBP20.9 million for
the six months ended June 30, 2019 was due to the net movement of funds
from short term investments to cash being less during the six months
ended June 30, 2020.
Cash, cash equivalents and short-term investments
Net cash, cash equivalents and short-term investments at June 30, 2020,
decreased to GBP18.1 million from GBP30.8 million at December 31, 2019
due to the utilization of cash in ordinary operating activities.
Net assets
Net assets decreased to GBP19.2 million at June 30, 2020, from GBP33.9
million at December 31, 2019. This was primarily due to losses generated
by the operating activities of the Company.
Post-period end
On July 16, 2020, Verona Pharma announced that it raised approximately
GBP159 million in a private placement with new and existing
institutional and accredited investors. The Private Placement comprised
a placement of 39,090,009 of the Company's American Depository Shares
("ADSs"), each representing eight Ordinary Shares or non-voting Ordinary
Shares of the Company, at a price of $4.50 per ADS, and 43,111,112 of
the Company's Ordinary Shares at the equivalent price per Ordinary Share,
being GBP0.45 or $0.5625.
The net proceeds of the Financing will be approximately GBP145 million
(USD 183 million) after deducting placement agent fees and estimated
expenses. The offering closed on July 22, 2020.
Three months ended June 30, 2020
The operating loss for the three months ended June 30, 2020, was GBP8.5
million (June 30, 2019: GBP12.0 million) and the loss after tax for the
three months ended June 30, 2020, was GBP7.4 million (June 30, 2019:
loss of GBP9.0 million).
Research and Development Costs
Research and development costs were GBP6.2 million for the three months
ended June 30, 2020, compared to GBP9.9 million for the three months
ended June 30, 2019, a decrease of GBP3.7 million. This decrease was
predominantly attributable to a GBP3.8 million decrease in clinical
trial expenses. In both periods there were costs relating to four
clinical trials (ongoing, in preparation or closing down) though in the
three months ended 30 June 2019, there were significant costs relating
to the Phase 2 four-week trial studying ensifentrine as an add-on
therapy to a long acting bronchodilator. This outweighs the start-up
costs for the ENHANCE program that have been incurred in the current
period.
General and Administrative Costs
General and administrative costs were GBP2.3 million for the three
months ended June 30, 2020, compared to GBP2.1 million for the three
months ended June 30, 2019, an increase of GBP0.2 million. The increase
was attributable to a GBP0.4 million increase in directors and officers
insurance and GBP0.3 million in salary and related costs due to
organizational changes. This was offset by a GBP0.4 million gain on
foreign exchange, driven by the assumed contingent liability, and a
GBP0.1 million fall in other expenses .
Finance Income and Expense
Finance income was GBP0.1 million for the three months ended June 30,
2020, and GBP1.0 million for the three months ended June 30, 2019.
Finance income in the three months ended June 30, 2020 comprised GBP28
thousand in relation to interest received on cash and short term
investments, compared to a GBP0.2 million in the prior period, together
with a GBP41 thousand foreign exchange gain on cash and short term
investments in the three months ended June 30, 2020 compared to a GBP0.7
million gain in the prior period.
Finance expense was GBP395 thousand for the three months ended June 30,
2020, compared to GBP36 thousand for the three months ended June 30,
2019. The increase was primarily due to a GBP0.4 million cost relating
to the unwind of the discount on the assumed contingent liability in the
three months ended June 30, 2020.
Taxation
Taxation for the three months ended June 30, 2020, amounted to a credit
of GBP1.4 million compared to a credit of GBP2.1 million for the three
months ended June 30, 2019.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
AS OF JUNE 30, 2020, AND DECEMBER 31, 2019
As of As of
June 30, December 31,
Notes 2020 2019
GBP'000s GBP'000s
ASSETS
Non-current assets:
Goodwill 441 441
Intangible assets 9 25,430 2,757
Property, plant and equipment 37 43
Right-of-use asset 10 1,096 971
Total non-current assets 27,004 4,212
Current assets:
Prepayments and other receivables 4,420 2,770
Current tax receivable 2,770 7,396
Short term investments 11 -- 7,823
Cash and cash equivalents 12 18,081 22,934
Total current assets 25,271 40,923
Total assets 52,275 45,135
EQUITY AND LIABILITIES
Capital and reserves attributable to
equity holders:
Share capital 5,324 5,266
Share premium 118,862 118,862
Share-based payment reserve 12,572 10,364
Accumulated loss (117,565) (100,627)
Total equity 19,193 33,865
Current liabilities:
Derivative financial instrument 13 711 895
Lease liabilities 638 460
Trade and other payables 7,111 8,261
Total current liabilities 8,460 9,616
Non-current liabilities:
Assumed contingent obligation 14 23,907 1,103
Non-current lease liability 677 491
Deferred income 38 60
Total non-current liabilities 24,622 1,654
Total equity and liabilities 52,275 45,135
======== ============
The accompanying notes form an integral part of these condensed
consolidated financial statements.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHSED JUNE 30, 2020, AND JUNE 30, 2019
(UNAUDITED)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
Notes 2020 2019 2020 2019
GBP'000s GBP'000s GBP'000s GBP'000s
Research and development costs (6,203) (9,916) (12,075) (15,844)
General and administrative costs (2,315) (2,130) (7,616) (3,961)
Operating loss (8,518) (12,046) (19,691) (19,805)
Finance income 6 141 1,011 532 2,202
Finance expense 6 (395) (36) (447) (187)
Loss before taxation (8,772) (11,071) (19,606) (17,790)
Taxation -- credit 7 1,422 2,099 2,683 3,412
Loss for the period (7,350) (8,972) (16,923) (14,378)
Other comprehensive income:
Items that might be subsequently reclassified to profit
or loss
Exchange differences on translating foreign operations 3 14 43 1
Total comprehensive loss attributable to owners of
the Company (7,347) (8,958) (16,880) (14,377)
Loss per ordinary share -- basic and diluted (pence) 8 (6.9) (8.5) (16.0) (13.7)
The accompanying notes form an integral part of these condensed
consolidated financial statements.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE MONTHSED JUNE 30, 2020, AND JUNE 30, 2019 (UNAUDITED)
Total
Share Share Share-based Accumulated Total
Capital Premium Expenses Losses Equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance at
April 1,
2019 5,266 118,862 8,543 (74,072) 58,599
Loss for the
period -- -- -- (8,972) (8,972)
Other
comprehensive
income for the
year:
Exchange
differences
on
translating
foreign
operations -- -- -- 14 14
Total
comprehensive
loss for the
period -- -- -- (8,958) (8,958)
Share-based
payments -- -- 666 -- 666
Balance at
June 30,
2019 5,266 118,862 9,209 (83,030) 50,307
Balance at
April 1,
2020 5,311 118,862 11,811 (110,160) 25,824
Loss for the
period -- -- -- (7,350) (7,350)
Other
comprehensive
income for the
year:
Exchange
differences
on
translating
foreign
operations -- -- -- 3 3
Total
comprehensive
loss for the
period -- -- -- (7,347) (7,347)
New share
capital
issued 13 -- -- (58) (45)
Share-based
payments -- -- 761 -- 761
Balance at
June 30,
2020 5,324 118,862 12,572 (117,565) 19,193
======== ======== =========== ========= =======
The currency translation reserve for June 30, 2020, and June 30, 2019,
is not considered material and as such is not presented in a separate
reserve but is included in the total accumulated losses reserve.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX MONTHSED JUNE 30, 2020, AND JUNE 30, 2019 (UNAUDITED)
Total
Share Share Share-based Accumulated Total
Capital Premium Expenses Losses Equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance at
January 1,
2019 5,266 118,862 7,923 (68,633) 63,418
Impact of
change in
accounting
policy(1) -- -- -- (20) (20)
Adjusted
Balance at
January 1,
2019 5,266 118,862 7,923 (68,653) 63,398
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
June 30,
2019 5,266 118,862 9,209 (83,030) 50,307
Balance at
January 1,
2020 5,266 118,862 10,364 (100,627) 33,865
Loss for the
period -- -- -- (16,923) (16,923)
Other
comprehensive
income for the
year:
Exchange
differences
on
translating
foreign
operations -- -- -- 43 43
Total
comprehensive
loss for the
period -- -- -- (16,880) (16,880)
New share
capital
issued 58 -- -- (58) --
Share-based
payments -- -- 2,208 -- 2,208
Balance at
June 30,
2020 5,324 118,862 12,572 (117,565) 19,193
======== ======== =========== ========= =======
The currency translation reserve for June 30, 2020, and June 30, 2019,
is not considered material and as such is not presented in a separate
reserve but is included in the total accumulated losses reserve.
(1) This relates to the adoption of IFRS 16. See note 2.17 of the 2019
20-F.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHSED JUNE 30, 2020, AND JUNE 30, 2019 (UNAUDITED)
Six Months Six Months
Ended Ended
June 30, 2020 June 30, 2019
GBP'000s GBP'000s
Cash used in operating activities:
Loss before taxation (19,606) (17,790)
Finance income (532) (2,202)
Finance expense 447 187
Share-based payment charge 2,208 1,286
(Increase) / decrease in prepayments and other
receivables (1,710) 65
(Decrease) / increase in trade and other payables (1,146) 163
Depreciation of property, plant and equipment and
right of use asset 247 157
Impairment of right of use asset 232 --
Unrealized foreign exchange (gains) / losses (232) 3
Amortization of intangible assets 61 50
Cash used in operating activities (20,031) (18,081)
Cash inflow from taxation 7,319 --
Net cash used in operating activities (12,712) (18,081)
Cash flow from investing activities:
Interest received 141 296
Purchase of plant and equipment (4) (21)
Payment for patents and computer software (105) (90)
Maturity of short term investments 7,848 20,686
Net cash generated in investing activities 7,880 20,871
Cash flow from financing activities:
Repayment of lease liabilities (263) (168)
Net cash used in financing activities (263) (168)
Net (decrease) / increase in cash and cash
equivalents (5,095) 2,622
Cash and cash equivalents at the beginning of the
period 22,934 19,784
Effect of exchange rates on cash and cash
equivalents 242 28
Cash and cash equivalents at the end of the period 18,081 22,434
========== ==== ========== ====
VERONA PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHSED JUNE 30, 2020
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 London Stock
Exchange and its American Depository Shares ("ADSs") on the Nasdaq
Global Market. The Company is incorporated and domiciled in the United
Kingdom.
The address of the registered office is 1 Central Square, Cardiff, CF10
1FS, United Kingdom.
The Company has two subsidiaries, Verona Pharma Inc. and Rhinopharma
Limited ("Rhinopharma"), both of which are wholly owned.
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 six months ended
June 30, 2020, do not include all the statements required for full
annual financial statements and should be read in conjunction with the
consolidated financial statements of the Group as of December 31, 2019.
The 2019 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
August 14, 2020. There have been no changes to the accounting policies
as contained in the annual consolidated financial statements as of and
for the year ended December 31, 2019, which have been prepared in
accordance with international financial reporting standards ("IFRS") as
issued by the International Accounting Standards Board ("IASB").
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 GBP31.9 million, GBP19.9 million and GBP20.5 million for the
years ended December 31, 2019, 2018 and 2017, respectively. In addition,
as of June 30, 2020, the Group had an accumulated loss of GBP117.6
million. The Group expects to continue to generate operating losses for
the foreseeable future. On July 17, 2020, the Group announced it raised
GBP159 million in a private placement, with net proceeds after
transaction related fees and expenses of approximately GBP145 million
(see note 17).
As of the issuance date of these condensed consolidated interim
financial statements, the Group therefore expects that its cash and cash
equivalents would 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.
Dividend
The Directors do not recommend the payment of a dividend for the six
months ended June 30, 2020, (six months ended June 30, 2019: GBPnil and
the year ended December 31, 2019: GBPnil).
3. 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 United Kingdom apart from a
right-of-use asset relating to a property lease in the United States.
4. 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 December 31,
2019.
5. 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 December 31, 2019, with the exception of development of
the COVID-19 pandemic.
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 obligation or other
balances and concluded that there is no significant impact.
6. Finance income and expense
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
GBP'000s GBP'000s GBP'000s GBP'000s
Finance income:
Interest received on cash and short term investments 28 229 81 479
Foreign exchange gain on translating foreign currency
denominated cash balances 41 669 267 --
Fair value adjustment on derivative financial instruments
(note 13) 72 113 184 1,723
Total finance income 141 1,011 532 2,202
============== ============== ============== ==============
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
GBP'000s GBP'000s GBP'000s GBP'000s
Finance expense:
Interest on discounted lease liability 22 6 42 15
Foreign exchange loss on translating foreign currency
denominated balances -- -- -- 114
Unwinding of discount factor movements related to
the assumed contingent arrangement (note 14) 373 30 405 58
Total finance expense 395 36 447 187
============== ============== ============== ==============
7. Taxation
The tax credit for the six month period ended June 30, 2020, amounts to
GBP2.7 million and consists of the estimated research and development
tax credit receivable on qualifying expenditure incurred during the six
month period ended June 30, 2020 for an amount of GBP2.7 million less a
tax expense of GBP52 thousand related to the U.S. operations (six month
period ended June 30, 2019: GBP3.4 million tax credit, comprising GBP3.4
million for research and development tax credit, less GBP19 thousand
expense for tax on U.S. operations).
The tax credit for the three month period ended June 30, 2020, amounts
to GBP1.4 million, and consists of the estimated research and
development tax credit receivable on qualifying expenditure incurred
during the three month period ended June 30, 2020 for an amount of
GBP1.4 million less a tax expense of GBP12 thousand related to the U.S.
operations (three month period ended June 30, 2019: GBP2.1 million tax
credit, comprising GBP2.1 million for research and development tax
credit, plus tax credit GBP20 thousand expense for tax on U.S.
operations).
8. Loss per share calculation
For the six months ended June 30, 2020, the basic loss per share of
16.0p (June 30, 2019: 13.7p) is calculated by dividing the loss for the
six months ended June 30, 2020 by the weighted average number of
ordinary shares in issue of 105,908,648 during the six months ended June
30, 2020 (June 30, 2019: 105,326,638). Potential ordinary shares are not
treated as dilutive as the entity is loss making and such shares would
be anti-dilutive.
For the three months ended June 30, 2020, the basic loss per share of
6.9p (June 30, 2019: 8.5p) is calculated by dividing the loss for the
three months ended June 30, 2020 by the weighted average number of
ordinary shares in issue of 106,360,580 during the three months ended
June 30, 2020 (June 30, 2019: 105,326,638). Potential ordinary shares
are not treated as dilutive as the entity is loss making and such shares
would be anti-dilutive.
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.
9. Intangible assets
Computer
IP R&D software Patents Total
GBP'000s GBP'000s GBP'000s GBP'000s
Cost
At January 1, 2020 1,953 18 1,214 3,185
Additions 22,629 -- 105 22,734
At June 30, 2020 24,582 18 1,319 25,919
Accumulated
amortization
At January 1, 2020 -- 15 413 428
Charge for year -- 1 60 61
At June 30, 2020 -- 16 473 489
Net book value
At June 30, 2020 24,582 2 846 25,430
======== ========= ======== ========
Movements in the assumed contingent liability (see note 14) 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 six months ended June 30, 2020, the Group determined that it
moved from Phase 2 of ensifentrine's clinical development plan to Phase
3. The probability of success and estimated cashflows have changed and
the GBP22.6 million movement in the liability relating to this was
recorded as an addition to the IP R&D asset that it relates to.
There were no changes in estimated cashflows or probabilities of success
in 2019.
10. Right-of-use assets
In the six months to June 30, 2020, a new lease was signed in North
Carolina and a liability and corresponding right-of-use ("ROU") asset of
GBP575 thousand was recognized. The lease terminates on April 30, 2024.
As at December 31, 2019, the Group had an ROU asset relating to office
space in New York. In the six months to June 30, 2020, the New York
office was closed and the ROU asset was subject to an impairment review
and its net book value of GBP232 thousand was subsequently expensed to
the income statement. The Group retains a liability of GBP192 thousand
relating to this asset.
11. Short term investments
Short term investments as at June 30, 2020, amounted to a total of
GBP0.0 million (December 31, 2019: GBP7.8 million) and consisted of
fixed term deposits.
12. 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.
13. Derivative financial instrument
On July 29, 2016 the Company issued 31,115,926 units to new and existing
investors at the placing price of GBP1.4365 per unit. Each unit
comprises one ordinary share and one warrant and the warrant holders may
subscribe for 0.4 of an ordinary share at a per share exercise price of
GBP1.7238.
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.
The warrants entitled the investors to subscribe for, in aggregate, a
maximum of 12,401,262 shares. The warrants can be exercised until May 2,
2022.
At June 30, 2020, and December 31, 2019, warrants over 12,401,262 shares
were in effect.
As of June 30, 2020 As of December 31, 2019
Shares available to be
issued under
warrants 12,401,262 12,401,262
Exercise price GBP 1.7238 GBP 1.7238
Risk-free interest
rate 0.00% 0.54%
Remaining term to
exercise 1.84 years 2.34 years
Annualized volatility 81.86% 65.56%
Dividend rate 0.00% 0.00%
As of June 30, 2020, the Group updated the underlying assumptions and
calculated a fair value of these warrants of GBP0.7 million.
The variance for the six month period ending June 30, 2020, was GBP0.2
million (six month period ending June 30, 2019: GBP1.7 million) and is
recorded as finance income in the Consolidated Statement of
Comprehensive Income.
Derivative Derivative
financial financial
instrument instrument
2020 2019
GBP'000s GBP'000s
As of January, 1 895 2,492
Fair value adjustments recognized in profit or
loss (184) (1,723)
As of June, 30 711 769
========= ==========
For the amount recognized as at June 30, 2020, the effect if volatility
were to deviate up or down is presented in the following table.
Volatility
(up / down
10 % pts)
GBP'000s
Variable up 989
Base case, reported fair value 711
Variable down 463
14. Assumed contingent obligation related to the business combination
The value of the assumed contingent obligation as of June 30, 2020,
amounted to GBP23.9 million (December 31, 2019: GBP1.1 million). The
increase in value of the assumed contingent obligation during the six
months ended June 30, 2020, amounted to GBP22.8 million (six months
ended June 30, 2019: GBP60 thousand).
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 May 13, 2020, the Group determined that it had moved from Phase 2
of ensifentrine's clinical development plan to Phase 3. As a consequence,
the probability of success has changed, reducing the risk-weighting
adjustment applied to estimated cashflows. Furthermore, the Group has
carried out market research and updated its forecasts for ensifentrine's
revenue for the maintenance treatment of chronic obstructive pulmonary
disorder using a nebulized formulation in the U.S. The Group therefore
updated estimated cashflows. In 2019 there were no events that triggered
remeasurement.
2020 2019
GBP'000s GBP'000s
January 1 1,103 996
Re-measurement of contingent liability 22,629 --
Impact of changes in foreign exchange rates (230) 2
Unwinding of discount factor 405 58
June 30 23,907 1,056
======= ========
There is no material difference between the fair value and carrying
value of the financial liability.
For the amount recognized as at June 30, 2020, of GBP23.9 million, the
effect if underlying assumptions were to deviate up or down is presented
in the following table (assuming the probability of success does not
change):
USD/GBP Probability Revenue
exchange rate of success (up / down
up/down 1 % pt up/down 5 % pt 10%)
GBP'000s GBP'000s GBP'000s
Variable up 23,693 25,683 26,071
Base case, reported fair
value 23,907 23,907 23,907
Variable down 24,125 22,131 21,742
15. Share option plans
During the six months ended June 30, 2020 the Company granted a total of
1,605,000 share options and 8,442,048 Restricted Stock Units ("RSUs")
(six months ended June 30, 2019, the Company granted 4,249,050 share
options, and 740,496 RSUs).
The movement in the number of the Company's share options is set out
below:
Weighted Weighted
average average
exercise exercise
price 2020 price 2019
GBP GBP
Outstanding at
January 1 1.15 14,179,196 1.53 8,752,114
Granted during
the period 0.55 1,605,000 0.57 4,249,050
Expired during
the period 1.39 (589,129) 2.00 (19,998)
Forfeited during
the period 1.04 (1,899,284) -- --
Outstanding
options at June
30 1.08 13,295,783 1.22 12,981,166
========== ==========
The movement in the number of the Company's RSUs is set out below:
2020 2019
Outstanding at January 1 1,602,969 862,473
Granted during the period 8,442,048 740,496
Exercised during the period (1,154,368) --
Forfeited during the period (84,889) --
Outstanding RSUs at June 30 8,805,760 1,602,969
========== =========
1,069,184 of the RSUs issued related to an element of annual base salary
and 7,372,865 related to additional equity grants for Dr. Zaccardelli
and Mr. Hahn (see note 16). Using the Black-Scholes valuation model the
fair value of each RSUs relating to annual base salary was GBP0.55 and
the fair value of each RSU relating to the additional grants was at
GBP0.43.
The share-based payment expense for the six months ended June 30, 2020,
was GBP2.2 million (six months ended June 30, 2019: GBP1.3 million).
16. 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 six months ended June 30, 2020, Dr. Jan-Anders Karlsson, the
Company's former CEO, and Piers Morgan, the Company's former CFO,
resigned and were replaced by Dr. David Zaccardelli as CEO and President,
and Mark Hahn as CFO.
Dr. Jan-Anders Karlsson's severance agreement included severance pay
equal to GBP479,160, a cash bonus of GBP40,000, a payment as
compensation of termination of employment of GBP100,000 and base salary
in lieu of notice of GBP363,000. Other benefits included continued
medical and life insurance and continued pension contributions.
Piers Morgan's severance agreement included severance pay equal to
GBP123,930 as payment in lieu of notice, a cash bonus of GBP82,620, ex
gratia compensation of GBP30,000 and GBP40,000 additional compensation
for termination of employment.
Pursuant to the terms of his employment agreement Dr. Zaccardelli is
entitled to receive an annual base salary of $750,000, payable $250,000
in cash and $500,000 in restricted stock units, and a target annual
bonus opportunity of 50% of his annual base salary. Dr. Zaccardelli is
also entitled to receive an award of restricted stock units, equal to 4%
of the Company's outstanding ordinary shares, and an additional award of
restricted stock units if the Company raises additional equity capital
during fiscal year 2020, which is intended to result in Dr.
Zaccardelli's equity awards (other than the portion of his base salary
payable in restricted stock units) being equal to 4% of the Company's
outstanding ordinary shares on the applicable date of issuance.
Following an equity capital raise in July, 2020, Dr. Zaccardelli is now
entitled to this additional award (see note 17).
Pursuant to the terms of his employment agreement Mr. Hahn is entitled
to receive an annual base salary of $500,000, payable $250,000 in cash
and $250,000 in restricted stock units, and a target annual bonus
opportunity of 50% of his annual base salary. Mr. Hahn is also entitled
to receive an initial award of restricted stock units, equal to 3% of
the Company's outstanding ordinary shares and an award of restricted
stock units equal to 1% of the Company's outstanding ordinary share
after six months of employment. He will also be entitled to an
additional award of restricted stock units if the Company raises
additional equity capital during fiscal year 2020, which is intended to
result in Mr. Hahn's equity awards (other than the portion of his base
salary payable in restricted stock units) being equal to 4% of the
Company's outstanding ordinary shares on the applicable date of
issuance. Following an equity capital raise in July 2020 Mr. Hahn is now
entitled to this additional award (see note 17).
During the six months ended June 30, 2020, 178,192 and 89,096 RSUs that
were issued to Dr. Zaccardelli and Mr. Hahn respectively vested. The
shares were issued on May 12, 2020.
17. Post balance sheet events
On July 17, 2020, Verona Pharma announced that it raised approximately
GBP159 million in a private placement with new and existing
institutional and accredited investors (the "Financing"). The Financing
comprised a private placement of 39,090,009 of the Company's American
Depository Shares ("ADSs"), each representing eight Ordinary Shares or
non-voting Ordinary Shares of the Company, at a price of $4.50 per ADS,
and 43,111,112 of the Company's Ordinary Shares at the equivalent price
per Ordinary Share, being GBP0.45 or $0.5625.
The net proceeds of the Financing will be approximately GBP145 million
after deducting placement agent fees and estimated expenses.
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 June
30, 2020, and for the three and six month periods ended June 30, 2020
into U.S. dollars at the noon buying rate of the Federal Reserve Bank of
New York on June 30, 2020, which was GBP1.00 to $1.2369. These
translations should not be considered representations that any such
amounts have been, could have been or could be converted into U.S.
dollars at that or any other exchange rate as of that or any other date.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE
AND SIX MONTHSED JUNE 30, 2020 (UNAUDITED)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2020 June 30, 2020 June 30, 2020 June 30, 2020
GBP'000s $'000s GBP'000s $'000s
Research and development costs (6,203) (7,672) (12,075) (14,936)
General and administrative costs (2,315) (2,863) (7,616) (9,420)
Operating loss (8,518) (10,535) (19,691) (24,356)
Finance income 141 174 532 658
Finance expense (395) (489) (447) (553)
Loss before taxation (8,772) (10,850) (19,606) (24,251)
Taxation -- credit 1,422 1,759 2,683 3,319
Loss for the period (7,350) (9,091) (16,923) (20,932)
Other comprehensive income:
Items that might be subsequently reclassified to profit
or loss
Exchange differences on translating foreign operations 3 4 43 53
Total comprehensive loss attributable to owners of
the Company (7,347) (9,087) (16,880) (20,879)
Loss per ordinary share -- basic (pence / cents) (6.9) (8.5) (16.0) (19.8)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT JUNE 30,
2020, AND DECEMBER 31, 2019 (UNAUDITED)
As of As of As of
June 30, June 30, December 31,
2020 2020 2019
GBP'000s $'000s GBP'000s
ASSETS
Non-current assets:
Goodwill 441 546 441
Intangible assets 25,430 31,454 2,757
Property, plant and equipment 37 46 43
Right-of-use asset 1,096 1,356 971
Total non-current assets 27,004 33,402 4,212
Current assets:
Prepayments and other
receivables 4,420 5,467 2,770
Current tax receivable 2,770 3,426 7,396
Short term investments -- -- 7,823
Cash and cash equivalents 18,081 22,364 22,934
Total current assets 25,271 31,257 40,923
Total assets 52,275 64,659 45,135
EQUITY AND LIABILITIES
Capital and reserves
attributable to equity
holders:
Share capital 5,324 6,585 5,266
Share premium 118,862 147,020 118,862
Share-based payment reserve 12,572 15,550 10,364
Accumulated loss (117,565) (145,416) (100,627)
Total equity 19,193 23,739 33,865
Current liabilities:
Derivative financial instrument 711 879 895
Finance lease liabilities 638 789 460
Trade and other payables 7,111 8,796 8,261
Total current liabilities 8,460 10,464 9,616
Non-current liabilities:
Assumed contingent obligation 23,907 29,571 1,103
Non-current lease liability 677 837 491
Deferred income 38 47 60
Total non-current liabilities 24,622 30,455 1,654
Total equity and liabilities 52,275 64,658 45,135
======== ======== ============
(END) Dow Jones Newswires
August 14, 2020 02:00 ET (06:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Verona Pharma (LSE:VRP)
Historical Stock Chart
From Dec 2024 to Jan 2025
Verona Pharma (LSE:VRP)
Historical Stock Chart
From Jan 2024 to Jan 2025
