UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ Commission File Number: 001-38067 Verona Pharma plc (Exact name of Registrant as specified in its Charter) United Kingdom 98-1489389 (State ...

Nasdaq: VRNA | www.veronapharma.com Developing innovative therapies for the treatment of respiratory diseases August 2021 Breath of Innovation™ Forward-looking statements This presentation contains "forward‐looking" statements that are based on the beliefs and assumptions and on information currently available to management of Verona Pharma plc (together with its consolidated subsidiaries, the "Company"). All statements other than statements of historical fact contained in this presentation are forward-look ...

Verona Pharma plc (NASDAQ:VRNA) Q2 2021 Earnings Conference Call August 5, 2021 8:30 AM ET Company Participants David Zaccardelli - President and CEO Mark Hahn - CFO Kathy Rickard - CMO Chris Martin - VP, Commercial Conference Call Participants Suji Jeong - Jefferies Sung Hong - BTIG Operator Welcome to Verona Pharma's Second Quarter 2021 Financial Results and Operating Highlights Conference Call. At this time, all participants are in a listen-only mode. Earlier this morning, Verona Pharma issued a press re ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Verona Pharma plc's unaudited condensed consolidated financial statements as of June 30, 2021, including balance sheets, statements of operations, statements of shareholders' equity, and cash flows, along with notes detailing accounting policies and the Nuance Pharma collaboration [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2021, total assets increased to **$218.5 million** from **$204.2 million** at year-end 2020, primarily due to new receivables from the Nuance agreement, while cash and cash equivalents decreased to **$146.0 million**, and total liabilities rose significantly to **$64.1 million** due to deferred revenue Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $146,035 | $187,986 | | Total current assets | $216,283 | $202,504 | | Total assets | $218,502 | $204,206 | | Deferred revenue | $40,051 | $0 | | Total liabilities | $64,105 | $19,352 | | Total shareholders' equity | $154,397 | $184,854 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a significantly higher net loss for both the three and six months ended June 30, 2021, with the six-month net loss doubling to **$43.4 million**, driven by substantial increases in research and development and general and administrative expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Research and development | $34,137 | $15,433 | | General and administrative | $17,267 | $10,034 | | Operating loss | $(51,404) | $(25,467) | | Net loss | $(43,358) | $(21,384) | | Loss per ordinary share | $(0.09) | $(0.20) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2021, net cash used in operating activities more than doubled to **$38.8 million**, reflecting higher operating losses, resulting in a net decrease in cash and cash equivalents of **$42.0 million** Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,756) | $(16,285) | | Net cash provided by investing activities | $0 | $9,787 | | Net cash used in financing activities | $(3,399) | $0 | | Net decrease in cash and cash equivalents | $(41,951) | $(8,068) | | Cash and cash equivalents at end of period | $146,035 | $22,360 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key events and accounting policies, most notably the collaboration and license agreement with Nuance Pharma, effective June 9, 2021, which provides **$40 million** in upfront consideration for rights to ensifentrine in Greater China, with revenue expected in Q3 2021 - Entered into a collaboration and license agreement with Nuance Pharma for ensifentrine in Greater China, receiving an unconditional right to **$40.0 million** in upfront consideration (**$25.0 million** cash and a **$15.0 million** equity interest), with eligibility for up to **$179.0 million** in future milestone payments[61](index=61&type=chunk) - The **$40.0 million** in upfront consideration from the Nuance Agreement was recorded as deferred revenue as of June 30, 2021, and is expected to be recognized as revenue in the third quarter of 2021[68](index=68&type=chunk)[72](index=72&type=chunk) - Ligand has claimed it is owed a **25%** sublicense payment on the **$40.0 million** upfront consideration from the Nuance Agreement, which Verona Pharma disputes, stating it has not granted a sublicense of Ligand's intellectual property[74](index=74&type=chunk) - The company has an at-the-market (ATM) offering program to sell up to **$100.0 million** in ADSs, having raised approximately **$0.4 million** during Q2 2021, with **$99.6 million** remaining available[29](index=29&type=chunk)[30](index=30&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's focus on the clinical development of its lead candidate, ensifentrine, for COPD, highlighting increased operating expenses due to Phase 3 trials, the financial impact of the Nuance Pharma collaboration, and a liquidity position deemed sufficient through at least 2023 [Overview and Clinical Development](index=20&type=section&id=Overview%20and%20Clinical%20Development) The company is advancing its Phase 3 ENHANCE trials for ensifentrine in COPD, but patient recruitment timelines are under pressure due to COVID-19 challenges, potentially delaying top-line data reporting from 2022 to Q3 and Q4 2022 for ENHANCE-2 and ENHANCE-1, respectively - The company is focused on developing ensifentrine, a potential first-in-class, inhaled dual inhibitor of PDE3 and PDE4, for respiratory diseases, with Phase 3 ENHANCE trials for COPD underway[89](index=89&type=chunk) - Patient recruitment for the Phase 3 ENHANCE program faces pressure from COVID-19 challenges, with mitigation strategies, such as allowing a subset of patients on ICS to enroll, having been implemented[92](index=92&type=chunk) - Top-line data reporting is projected for H1 2022 (ENHANCE-2) and H2 2022 (ENHANCE-1), but could be delayed to Q3 and Q4 2022, respectively, if COVID-19 challenges persist[93](index=93&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Operating results for the three and six months ended June 30, 2021, show a substantial increase in net loss compared to 2020, with the six-month net loss growing to **$43.4 million** from **$21.4 million**, primarily due to an **$18.7 million** increase in R&D costs for the Phase 3 ENHANCE program and a **$7.3 million** increase in G&A costs Comparison of Operations - Three Months Ended June 30 (in thousands) | Metric | 2021 | 2020 | Variance | | :--- | :--- | :--- | :--- | | Research and development | $20,563 | $7,811 | $12,752 | | General and administrative | $7,985 | $3,172 | $4,813 | | Net loss | $(22,068) | $(9,038) | $(13,030) | Comparison of Operations - Six Months Ended June 30 (in thousands) | Metric | 2021 | 2020 | Variance | | :--- | :--- | :--- | :--- | | Research and development | $34,137 | $15,433 | $18,704 | | General and administrative | $17,267 | $10,034 | $7,233 | | Net loss | $(43,358) | $(21,384) | $(21,974) | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2021, the company had **$146.0 million** in cash and cash equivalents, and management believes these funds, combined with the **$25 million** upfront payment from Nuance, expected UK tax credits, and available term loan funds, are sufficient to fund operations through at least 2023 - The company believes its cash position as of June 30, 2021, along with the Nuance upfront payment, tax credits, and available debt financing, will fund planned operating expenses through at least 2023[170](index=170&type=chunk) - An at-the-market (ATM) program is in place to sell up to **$100.0 million** of ADSs; as of June 30, 2021, **$99.6 million** remained available for sale[167](index=167&type=chunk)[168](index=168&type=chunk) - The company has a term loan facility of up to **$30.0 million** with Silicon Valley Bank, with **$5.0 million** in principal outstanding as of June 30, 2021, and further advances contingent on achieving clinical milestones[169](index=169&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Verona Pharma is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and is not required to provide quantitative and qualitative disclosures about market risk[179](index=179&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, while noting the need to implement new controls over financial reporting related to the Nuance Agreement - The principal executive officer and principal financial officer concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective at a reasonable assurance level[181](index=181&type=chunk) - Due to the new Nuance Agreement, the company will be required to implement certain new controls over financial reporting in the year ending December 31, 2021[182](index=182&type=chunk) [PART II - OTHER INFORMATION](index=34&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently subject to any material legal proceedings - As of the reporting date, the company is not a party to any material legal proceedings[183](index=183&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section introduces a new material risk factor related to the collaboration and license agreement with Nuance Pharma, highlighting the company's dependence on Nuance Pharma for the development and commercialization of ensifentrine in Greater China - A new risk factor has been identified concerning the collaboration with Nuance Pharma, where the company's business could be adversely affected if Nuance Pharma fails to develop and commercialize ensifentrine in Greater China or if the agreement is terminated[185](index=185&type=chunk) - The company is dependent on Nuance Pharma's efforts and resource allocation for success in the Greater China market, and interests between the two companies may differ or conflict[189](index=189&type=chunk) - The company faces significant competition in seeking other strategic collaborators for ensifentrine, and failure to secure such partnerships could curtail or delay development and commercialization programs[191](index=191&type=chunk)[192](index=192&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=36&type=section&id=Other%20Items%20(Items%202,%203,%204,%205,%206)) This section confirms standard disclosures, reporting no unregistered sales of equity securities, no defaults upon senior securities, no mine safety disclosures, and provides a list of exhibits filed with the 10-Q - Item 2: No unregistered sales of equity securities[194](index=194&type=chunk) - Item 3: No defaults upon senior securities[195](index=195&type=chunk) - Item 6: A list of exhibits filed with the report is provided, including the Collaboration and License Agreement with Nuance Pharma[200](index=200&type=chunk)

Financial Data and Key Metrics Changes - The company ended Q1 2021 with $169.6 million in cash and equivalents, which is expected to support operations and clinical development into 2023 [11] - The loss after tax for Q1 2021 was $21.3 million, compared to $12.3 million in Q1 2020, representing a loss of $0.05 per ordinary share or $0.40 per ADS [11][12] - Research and development costs increased to $13.6 million in Q1 2021 from $7.6 million in Q1 2020, primarily due to the Phase 3 clinical program [12] - General and administrative costs rose to $9.3 million in Q1 2021 from $6.9 million in Q1 2020, driven by increased share-based compensation [12] Business Line Data and Key Metrics Changes - The company is currently enrolling patients in two Phase 3 trials (ENHANCE-1 and ENHANCE-2) for ensifentrine, targeting approximately 800 moderate to severe symptomatic COPD patients in each study [4][5] - Positive results were announced from a Phase 2 trial with the PMDI formulation of ensifentrine, showing significant improvements in lung function compared to placebo [7] Market Data and Key Metrics Changes - The ongoing COVID-19 pandemic has impacted patient recruitment for the ENHANCE trials, but the company remains on track to complete enrollment in the second half of 2021 [4][5] - The company is implementing site-specific tactics to mitigate COVID-19's effects, including increased advertising and support for patient recruitment logistics [5] Company Strategy and Development Direction - The company aims to commercialize ensifentrine and has strengthened its Board with the appointment of a new non-executive director with significant experience in respiratory therapies [9] - The company anticipates several important milestones in 2021, including presenting data at the American Thoracic Society 2021 International Conference [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about completing enrollment in the ENHANCE trials by the end of 2021, contingent on the ongoing impact of COVID-19 [16][28] - The company is closely monitoring the situation and is prepared to adjust its strategies as necessary [28] Other Important Information - The UK R&D tax credit for Q1 2021 was $2.1 million, an increase from $1.7 million in the same period in 2020, reflecting higher qualifying R&D expenditures [12][13] - The company does not plan further studies of ensifentrine for COVID-19 treatment at this time, based on the results of a pilot study [8][38] Q&A Session Summary Question: Is there an acceleration in enrollment for the ENHANCE trials? - Management confirmed that enrollment is progressing and has accelerated, with a goal to complete by the end of 2021, although COVID-19 continues to impact recruitment [16] Question: How many sites are open for ENHANCE-1 and ENHANCE-2? - Management indicated that there are well over 200 sites involved globally, primarily in the U.S., Europe, and Asia, and they are confident in their ability to meet enrollment projections [18] Question: Why are GI adverse events mild with ensifentrine? - Management explained that the inhaled route of administration contributes to a favorable safety profile, limiting systemic exposure and associated side effects [22][23] Question: Will there be further expenses related to the COVID-19 program? - Management stated that there may be minor cleanup costs in Q2, but no significant expenses are expected [26] Question: How is patient compliance being managed in the ENHANCE trials? - Management noted that they are tracking patient follow-up closely and have built in options to adjust for any impacts of COVID-19 on discontinuations [30] Question: Will there be flexibility in protocol violations due to COVID-19? - Management confirmed that the protocol was adjusted to accommodate flexibility for sites impacted by COVID-19, ensuring the study's integrity [31] Question: Will further data be released from the COVID-19 pilot study? - Management indicated that while no notable efficacy signals were found, additional data will be analyzed and shared as appropriate [36]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20statements) The company presents its unaudited condensed consolidated financial statements for the three months ended March 31, 2021 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $169,598 | $187,986 | | Total current assets | $188,601 | $202,504 | | Total assets | $190,150 | $204,206 | | Total current liabilities | $12,698 | $14,203 | | Total liabilities | $17,736 | $19,352 | | Total shareholders' equity | $172,414 | $184,854 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Research and development | $13,574 | $7,622 | | General and administrative | $9,282 | $6,862 | | Total operating expenses | $22,856 | $14,484 | | Operating loss | $(22,856) | $(14,484) | | Net loss | $(21,290) | $(12,346) | | Loss per ordinary share - basic and diluted | $(0.05) | $(0.12) | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Condensed Consolidated Statements of Shareholders' Equity | Metric (in thousands) | March 31, 2021 | January 1, 2021 | March 31, 2020 | January 1, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total shareholders' equity | $172,414 | $184,854 | $30,157 | $42,741 | | Net loss | $(21,290) | — | $(12,346) | — | | Share-based compensation | $8,850 | — | $1,867 | — | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,551) | $(13,224) | | Net cash provided by investing activities | — | $9,787 | | Net cash provided by financing activities | — | — | | Cash and cash equivalents at end of the period | $169,598 | $24,983 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1 - Organization and description of business operations](index=9&type=section&id=Note%201%20-%20Organization%20and%20description%20of%20business%20operations) - Verona Pharma plc is a clinical-stage biopharmaceutical group focused on developing and commercializing innovative therapeutics for respiratory diseases, with its ADSs listed on Nasdaq under the symbol "VRNA"[21](index=21&type=chunk) - The Company has incurred recurring losses and negative cash flows from operations since inception, with an **accumulated deficit of $228.4 million** as of March 31, 2021[22](index=22&type=chunk) - Cash and cash equivalents as of March 31, 2021, are expected to fund operating expenses and capital expenditure requirements for **at least the next 12 months**[23](index=23&type=chunk) [Note 2 - Basis of Presentation and Summary of Significant Accounting policies](index=9&type=section&id=Note%202%20-%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20policies) - The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP and include Verona Pharma plc and its wholly-owned subsidiaries[25](index=25&type=chunk) - The Company operates as one operating and reportable segment: **pharmaceutical development**[28](index=28&type=chunk) [Note 3 - Prepaid expenses](index=10&type=section&id=Note%203%20-%20Prepaid%20expenses) Prepaid Expenses | Prepaid Expense (in thousands) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Clinical trial and other development costs | $6,296 | $2,551 | | Insurance | $574 | $1,701 | | Other | $377 | $286 | | Total prepaid expenses and other current assets | $7,247 | $4,538 | [Note 4 - Tax and tax incentive receivables](index=10&type=section&id=Note%204%20-%20Tax%20and%20tax%20incentive%20receivables) Tax Receivables | Tax Receivable (in thousands) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Research and development tax credit receivable - U.K. | $10,272 | $8,202 | | Tax receivable - U.S. | — | $58 | | Total tax receivable | $10,272 | $8,260 | [Note 5 - Accrued expenses](index=10&type=section&id=Note%205%20-%20Accrued%20expenses) Accrued Expenses | Accrued Expense (in thousands) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Clinical trial and other development costs | $6,536 | $8,607 | | Professional fees and general corporate costs | $1,454 | $2,149 | | People related costs | $524 | $107 | | Total accrued expenses | $8,514 | $10,863 | [Note 6 - Warrants](index=11&type=section&id=Note%206%20-%20Warrants) - The fair value of warrants increased to **$2.753 million** as of March 31, 2021, from $2.246 million as of December 31, 2020, valued using the Black-Scholes model[37](index=37&type=chunk) Warrant Valuation Assumptions | Warrant Valuation Assumption | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Shares potentially issued under warrants | 12,401,262 | 12,401,262 | | Exercise price in pounds sterling | £1.7238 | £1.7238 | | Risk-free interest rate | 0.08 % | — % | | Expected term to exercise | 1.09 years | 1.33 years | | Annualized volatility | 109.1 % | 105.4 % | | Dividend rate | — % | — % | | Calculated value of the warrants (in thousands of U.S. dollars) | $2,753 | $2,246 | [Note 7 - Term loan](index=11&type=section&id=Note%207%20-%20Term%20loan) - The Company entered into a term loan facility of up to **$30.0 million** in November 2020, with **$5.0 million** principal outstanding as of March 31, 2021[38](index=38&type=chunk) - The carrying value of the Term Loan was approximately **$4.7 million** as of March 31, 2021, categorized within Level 3 of the fair value hierarchy[39](index=39&type=chunk) [Note 8 - Share-based compensation](index=12&type=section&id=Note%208%20-%20Share-based%20compensation) Share-based Compensation Expense | Share-based Compensation (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Research and development | $3,432 | $493 | | General and administrative | $5,418 | $1,374 | | Total | $8,850 | $1,867 | Share Option Activity (2021) | Share Option Activity (2021) | Number of share options outstanding | Weighted average exercise price | | :--- | :--- | :--- | | Outstanding at January 1 | 13,125,672 | $1.41 | | Forfeited | (996,720) | $1.17 | | Outstanding at March 31 | 12,128,952 | $1.43 | Restricted Stock Unit (RSU) Activity (2021) | Restricted Stock Unit (RSU) Activity (2021) | Number of RSUs outstanding | Weighted average remaining contractual term (years) | | :--- | :--- | :--- | | Outstanding at January 1 | 61,992,360 | 1.5 | | Granted | 750,928 | | | Vested | (441,304) | | | Outstanding at March 31 | 62,301,984 | 1.3 | [Note 9 - Net loss per share](index=13&type=section&id=Note%209%20-%20Net%20loss%20per%20share) Net Loss Per Share Calculation | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net loss available to ordinary shareholders (in thousands) | $21,290 | $12,346 | | Weighted-average shares outstanding - basic and diluted | 469,465,085 | 105,453,364 | | Net loss per share - basic and diluted | $(0.05) | $(0.12) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company discusses its financial condition and results of operations for the three months ended March 31, 2021 [Overview](index=14&type=section&id=Overview) - Verona Pharma is a clinical-stage biopharmaceutical company focused on developing ensifentrine, a potential first-in-class inhaled dual PDE3 and PDE4 inhibitor, for respiratory diseases like COPD[51](index=51&type=chunk) - The company has an **accumulated deficit of $228.4 million** as of March 31, 2021, and expects increased expenses for clinical development, manufacturing, intellectual property, and commercialization[52](index=52&type=chunk)[53](index=53&type=chunk) - Current cash and cash equivalents, along with debt financing and UK tax credits, are expected to **fund operations into 2023**[54](index=54&type=chunk) [Clinical development update](index=15&type=section&id=Clinical%20development%20update) - **Positive Phase 2 efficacy and safety data** for ensifentrine pMDI formulation in moderate to severe COPD patients were announced in February 2021, supporting twice-daily dosing[55](index=55&type=chunk) - Data from a pilot study showed ensifentrine pMDI was well tolerated in SARS-CoV-2 patients, but **no clinical efficacy benefit was observed**, and no further COVID-19 studies are planned[56](index=56&type=chunk) - Enrollment for Phase 3 ENHANCE trials is expected to complete in H2 2021, with top-line data from **ENHANCE-2 in H1 2022** and **ENHANCE-1 in H2 2022**[57](index=57&type=chunk) [Intellectual property update](index=15&type=section&id=Intellectual%20property%20update) - As of March 31, 2021, the patent portfolio includes **nine issued U.S. patents**, three pending U.S. applications, **forty-eight issued foreign patents**, and fifty-three pending foreign applications[59](index=59&type=chunk) - Patents cover respirable formulations, a crystalline form, combinations with other drugs, salts, use in cystic fibrosis, and manufacturing methods for ensifentrine, with **expiry dates up to 2041**[59](index=59&type=chunk) [COVID-19 impact](index=15&type=section&id=COVID-19%20impact) - The company is closely monitoring the potential impact of the COVID-19 pandemic on clinical trial timelines and costs, and will provide updates on any meaningful disruptions[60](index=60&type=chunk) - Measures are in place to ensure the safety of clinical trial participants and employees, including remote work and restricted business travel[61](index=61&type=chunk)[63](index=63&type=chunk) - Contract manufacturers have plans to ensure uninterrupted clinical supply of ensifentrine, subject to potential supply chain limitations[62](index=62&type=chunk) [Significant contracts](index=16&type=section&id=Significant%20contracts) - The Ligand Agreement involves contingent liabilities for milestone payments upon regulatory approval, **low single-digit royalties on sales**, and a mid-twenty percent share of sub-license consideration for ensifentrine-related patents and know-how[66](index=66&type=chunk) - Warrants issued in a 2016 private placement are accounted for as a liability at fair value using the Black-Scholes model, exercisable until April 2022[68](index=68&type=chunk)[69](index=69&type=chunk) - A Term Loan facility of up to **$30.0 million** was entered into in November 2020, with **$5.0 million** funded at closing[70](index=70&type=chunk) [Critical accounting policies and significant judgments and estimates](index=16&type=section&id=Critical%20accounting%20policies%20and%20significant%20judgments%20and%20estimates) - Significant estimates include the accrual and prepayment of research and development expenses, the fair value of share-based compensation, and the fair value of warrants[71](index=71&type=chunk) - There have been **no material changes** to the critical accounting policies and estimates disclosed in the 2020 Form 10-K during the three months ended March 31, 2021[71](index=71&type=chunk) [Components of results of operations](index=17&type=section&id=Components%20of%20results%20of%20operations) - Expenses are anticipated to increase substantially due to ongoing Phase 3 clinical trials for ensifentrine, development of other formulations, new clinical trials for other indications, and potential commercialization efforts[73](index=73&type=chunk) [Operating expenses](index=18&type=section&id=Operating%20expenses) - Research and development costs, including personnel and third-party clinical/manufacturing expenses, are **expected to increase significantly** as the ENHANCE program progresses[74](index=74&type=chunk)[75](index=75&type=chunk) - General and administrative costs, including personnel, public company expenses, and commercial-related costs, are **expected to rise** with the development of potential commercial operations[76](index=76&type=chunk)[77](index=77&type=chunk) [Other income / (expense)](index=18&type=section&id=Other%20income%20/%20(expense)) - Other income/expense is primarily influenced by interest income/expense, fair value movements of warrant liability, foreign exchange gains, and U.K. research and development tax credits[78](index=78&type=chunk) - A proposed cap on the U.K. R&D tax relief program, effective January 1, 2022, could **reduce the potential cash received by approximately $6 million** for the 2022 financial year[80](index=80&type=chunk) [Taxation](index=18&type=section&id=Taxation) - The Company is subject to corporate taxation in the U.S. and U.K., with U.S. income tax expense arising from intercompany service arrangements[81](index=81&type=chunk) - U.K. losses can be carried forward indefinitely, subject to an annual offset limit of **£5.0 million** plus an incremental 50% of U.K. taxable profits[82](index=82&type=chunk) [Results of operations for the three months ended March 31, 2021 and 2020](index=19&type=section&id=Results%20of%20operations%20for%20the%20three%20months%20ended%20March%2031,%202021%20and%202020) - The company transitioned to U.S. GAAP and U.S. dollar reporting as of January 1, 2021, impacting comparability with prior IFRS/GBP figures[84](index=84&type=chunk) Results of Operations | Metric (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Variance | | :--- | :--- | :--- | :--- | | Research and development | $13,574 | $7,622 | $5,952 | | General and administrative | $9,282 | $6,862 | $2,420 | | Total operating expenses | $22,856 | $14,484 | $8,372 | | Operating loss | $(22,856) | $(14,484) | $(8,372) | | Net loss | $(21,290) | $(12,346) | $(8,944) | [Research and development costs](index=19&type=section&id=Research%20and%20development%20costs) - Research and development costs **increased by $6.0 million to $13.6 million** for the three months ended March 31, 2021, primarily due to a $3.4 million increase in clinical trial costs for the Phase 3 ENHANCE program and a $2.9 million increase in share-based compensation[86](index=86&type=chunk)[87](index=87&type=chunk) [General and administrative costs](index=19&type=section&id=General%20and%20administrative%20costs) - General and administrative costs **increased by $2.4 million to $9.3 million** for the three months ended March 31, 2021, driven by a $4.0 million increase in share-based compensation and higher Directors' and Officers' insurance costs, partially offset by prior year severance expenses[88](index=88&type=chunk) [Other income / (expense)](index=20&type=section&id=Other%20income%20/%20(expense)) - The research and development tax credit **increased by $0.4 million to $2.1 million** for the three months ended March 31, 2021, due to higher qualifying R&D expenditure[89](index=89&type=chunk) - A **$0.5 million expense** was recorded for fair value movements on warrants in Q1 2021, compared to a $0.1 million gain in Q1 2020, reflecting the impact of share price changes[90](index=90&type=chunk) [Net loss](index=20&type=section&id=Net%20loss) - Net loss **increased by $8.9 million to $21.3 million** for the three months ended March 31, 2021, primarily due to increased operating costs and a decrease in net other income[91](index=91&type=chunk) [Cash flows](index=20&type=section&id=Cash%20flows) Cash Flow Summary | Cash Flow Metric (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Variance | | :--- | :--- | :--- | :--- | | Cash and cash equivalents at beginning of period | $187,986 | $30,428 | $157,558 | | Net cash used in operating activities | $(18,551) | $(13,224) | $(5,327) | | Net cash provided by investing activities | — | $9,787 | $(9,787) | | Net cash provided by financing activities | — | — | — | | Effect of exchange rate changes on cash and cash equivalents | $163 | $(2,008) | $2,171 | | Cash and cash equivalents at end of period | $169,598 | $24,983 | $144,615 | [Operating activities](index=20&type=section&id=Operating%20activities) - Net cash used in operating activities **increased by $5.4 million to $18.6 million** for the three months ended March 31, 2021, primarily due to an $8.4 million increase in operating expenses, of which $7.0 million was non-cash share-based compensation, and timing of supplier payments[93](index=93&type=chunk) [Investing activities](index=20&type=section&id=Investing%20activities) - Net cash provided by investing activities **decreased to nil** for the three months ended March 31, 2021, compared to $9.8 million in the prior period, as funds were moved from short-term investments to cash in 2020[94](index=94&type=chunk) [Financing activities](index=20&type=section&id=Financing%20activities) - There was **no cash used in or provided by financing activities** in either the three months ended March 31, 2021, or 2020[95](index=95&type=chunk) [Liquidity and capital resources](index=20&type=section&id=Liquidity%20and%20capital%20resources) - The company has no approved products and has not generated revenue from product sales, financing operations primarily through equity issuances and a term loan[96](index=96&type=chunk) - An **accumulated deficit of $228.4 million** as of March 31, 2021, and expected continued operating losses necessitate significant additional capital for future clinical, regulatory, and commercialization activities[97](index=97&type=chunk)[102](index=102&type=chunk) - Current cash and cash equivalents, along with expected funding from the Term Loan and U.K. tax credits, are projected to **fund operations into 2023**[101](index=101&type=chunk) [Open market sale agreement](index=21&type=section&id=Open%20market%20sale%20agreement) - On March 19, 2021, the company entered into an at-the-market (ATM) equity offering program with Jefferies LLC to sell up to **$100.0 million of ADSs**, but no shares had been sold as of March 31, 2021[99](index=99&type=chunk) [Indebtedness](index=21&type=section&id=Indebtedness) - A term loan facility of up to **$30.0 million** was secured with Silicon Valley Bank in November 2020, with **$5.0 million** principal outstanding as of March 31, 2021[100](index=100&type=chunk) [Funding requirements](index=21&type=section&id=Funding%20requirements) - **Significant additional capital is required** to advance clinical and regulatory activities, fund pre-launch and launch costs, and establish a sales and marketing organization for ensifentrine[102](index=102&type=chunk) - Future funding may come from public or private financings, debt, collaborations, or licensing agreements, with risks of shareholder dilution or unfavorable terms[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - Capital requirements depend on factors such as clinical trial progress, new product candidates, organizational growth, intellectual property costs, regulatory approvals, and commercialization expenses[105](index=105&type=chunk)[112](index=112&type=chunk) [Off-balance sheet arrangements](index=22&type=section&id=Off-balance%20sheet%20arrangements) - The company does not have any relationships with unconsolidated entities or financial partnerships, nor does it engage in off-balance sheet financing arrangements or trading activities involving non-exchange traded contracts[107](index=107&type=chunk) [Recent accounting pronouncements](index=22&type=section&id=Recent%20accounting%20pronouncements) - There are no recently adopted accounting standards or recent accounting standards not yet adopted that the Company believes will have a **material impact** on its consolidated financial statements[32](index=32&type=chunk)[108](index=108&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing disclosures about market risk - Verona Pharma plc is a smaller reporting company and is **not required to provide** quantitative and qualitative disclosures about market risk[109](index=109&type=chunk) [Item 4. Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed effective as of March 31, 2021, with no material changes to internal controls [Limitations on Effectiveness of Controls and Procedures](index=22&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) - Management acknowledges that any controls and procedures, regardless of design, can only provide **reasonable assurance** of achieving desired control objectives due to inherent limitations, resource constraints, and judgment[110](index=110&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=22&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - As of March 31, 2021, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were **effective at the reasonable assurance level**[111](index=111&type=chunk) [Changes in Internal Control over Financial Reporting](index=22&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - **No changes** in internal control over financial reporting occurred during the quarter ended March 31, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[112](index=112&type=chunk) [PART II - OTHER INFORMATION](index=23&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is **not currently subject** to any material legal proceedings[114](index=114&type=chunk) [Item 1A. Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) The company's risk factors have not materially changed from those previously disclosed in its 2020 Form 10-K - The company's risk factors have **not changed materially** from those described in Part I, Item 1A of the 2020 Form 10-K[115](index=115&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - There were **no unregistered sales** of equity securities and use of proceeds to report[116](index=116&type=chunk) [Item 3. Defaults Upon Senior Securities](index=23&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - There were **no defaults** upon senior securities to report[117](index=117&type=chunk) [Item 4. Mine Safety Disclosure](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) Mine safety disclosure is not applicable to the company's operations - Mine safety disclosure is **not applicable** to the company[118](index=118&type=chunk) [Item 5. Other Information](index=23&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - There is **no other information** to report[119](index=119&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q Filed Exhibits | Exhibit Number | Exhibit Description | Filed / Furnished | | :--- | :--- | :--- | | 31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | Filed herewith | | 31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | Filed herewith | | 32.1 | Section 1350 Certification of Chief Executive Officer | Furnished herewith| | 32.2 | Section 1350 Certification of Chief Financial Officer | Furnished herewith| | 101.INS | Inline XBRL Instance Document | Filed herewith | | 104 | Cover Page Interactive Data File | |

Verona Pharma plc (NASDAQ:VRNA) Q4 2020 Earnings Conference Call February 25, 2020 9:00 AM ET Company Participants David Zaccardelli - CEO Mark Hahn - CFO Kathy Rickard - CMO Chris Martin - VP, Commercial Conference Call Participants Tom Shrader - BTIG Suji Jeong - Jefferies Andreas Argyrides - Wedbush Securities Joon Lee - Truist Securities Operator Welcome to Verona Pharma's Fourth Quarter and Year End 2020 Financial Results and Operating Highlights Conference Call. At this time, all participants are in a ...

Ensifentrine: A Novel Respiratory Therapy - Ensifentrine is a Phase 3, first-in-class candidate for unmet respiratory needs, acting as an inhaled PDE3 and PDE4 inhibitor[4] - Clinical trials involving over 1300 subjects showed a safety profile similar to placebo[4, 14] - Ensifentrine impacts 3 key mechanisms in respiratory disease: airway smooth muscle, inflammatory cells, and epithelial cells[9] - Phase 2b data showed statistically significant and clinically meaningful improvements in lung function with the 3 mg dose[14] - Phase 2b trials also demonstrated statistically significant and clinically meaningful improvements in symptoms and Quality of Life measures[14] Market Opportunity and Commercialization - The total US sales of chronic maintenance COPD therapies is $96 billion[4] - There are 12 million US COPD patients failing despite maximum therapy[4] - The average annual WAC price of existing nebulized COPD drugs is $12000[59, 66] - Over 85% of lives will be covered by payers, with the remainder through Medical Exception[63] Financial Status - As of December 31, 2020, Verona Pharma had $1880 million in cash and equivalents[73] - Operating expenses for FY 2020 were $743 million[73]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ Commission File Number: 001-38067 (Exact name of Registrant as specified in its Charter) United Kingdom 98-1489389 (State or other jurisdiction of in ...

Verona Pharma plc (NASDAQ:VRNA) Q3 2020 Earnings Conference Call October 29, 2020 9:00 PM ET Company Participants David Zaccardelli - CEO Mark Hahn - CFO Kathy Rickard - CMO Chris Martin - VP, Commercial Conference Call Participants Joon Lee - Truist Securities Suji Jeong - Jefferies Tom Shrader - BTIG Edward Nash - Canaccord Genuity Operator Welcome to the Verona Pharma Third Quarter 2020 Financial Results and Operating Highlights Conference Call. At this time, all participants are in a listen-only mode. E ...