Verona Pharma(VRNA) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents Verona Pharma's financial statements, including balance sheets, statements of operations, and cash flows, along with accompanying notes Financial Statements For the six months ended June 30, 2022, Verona Pharma reported a net loss of $42.6 million, with total assets of $154.9 million and cash and cash equivalents decreasing to $111.5 million Condensed Consolidated Balance Sheets This section provides a summary of the company's financial position at June 30, 2022, compared to December 31, 2021 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $111,510 | $148,380 | | Total current assets | $138,632 | $170,063 | | Total assets | $154,856 | $186,587 | | Liabilities & Equity | | | | Total current liabilities | $38,863 | $33,422 | | Total liabilities | $43,976 | $38,582 | | Total shareholders' equity | $110,880 | $148,005 | | Total liabilities and shareholders' equity | $154,856 | $186,587 | Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance, including operating loss and net loss, for the three and six months ended June 30, 2022 and 2021 Statement of Operations Summary (in thousands) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $14,982 | $20,563 | $32,607 | $34,137 | | Selling, general and administrative | $5,526 | $7,985 | $12,966 | $17,267 | | Operating loss | ($20,508) | ($28,548) | ($45,573) | ($51,404) | | Net loss | ($17,766) | ($22,068) | ($42,603) | ($43,358) | | Loss per ordinary share | ($0.04) | ($0.05) | ($0.09) | ($0.09) | Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2022 and 2021 Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($34,029) | ($38,756) | | Net cash used in investing activities | ($29) | $0 | | Net cash used in financing activities | ($1,415) | ($3,399) | | Net change in cash and cash equivalents | ($36,870) | ($41,951) | | Cash and cash equivalents at end of period | $111,510 | $146,035 | Notes to Condensed Consolidated Financial Statements This section provides additional information and details supporting the condensed consolidated financial statements - The company is a clinical-stage biopharmaceutical firm focused on respiratory diseases, with an accumulated deficit of $306.7 million as of June 30, 2022, due to recurring losses since inception[25][26] - Management believes existing cash and cash equivalents are sufficient to fund operations for at least the next 12 months from the report's issuance date[27] - The company has a term loan facility of up to $30.0 million with Silicon Valley Bank, with $5.0 million principal outstanding as of June 30, 2022, and additional tranches contingent on clinical milestones[43] - In June 2021, the company entered a collaboration and license agreement with Nuance Pharma for ensifentrine in Greater China, receiving $25.0 million in cash and a $15.0 million equity interest, with eligibility for up to $179.0 million in future milestone payments[62] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the positive top-line results from the Phase 3 ENHANCE-2 trial for ensifentrine and plans to submit an NDA in the first half of 2023, contingent on ENHANCE-1 results, while operating expenses decreased primarily due to lower share-based compensation Overview and Clinical Development Update This section provides an overview of Verona Pharma's focus on ensifentrine and updates on its Phase 3 clinical trials - Verona Pharma is a clinical-stage biopharmaceutical company focused on developing ensifentrine, a first-in-class inhaled dual inhibitor of PDE3 and PDE4 for respiratory diseases[83] - The Phase 3 ENHANCE-2 trial for nebulized ensifentrine in COPD met its primary and secondary endpoints, showing significant improvements in lung function and a 42% reduction in the rate of moderate to severe exacerbations over 24 weeks[84][90] - Top-line data from the second Phase 3 trial, ENHANCE-1, is expected around the end of 2022, with a New Drug Application (NDA) submission to the FDA planned for the first half of 2023, pending positive results[85][94] - The company is monitoring potential impacts from the COVID-19 pandemic and the Russia-Ukraine conflict on its clinical trial operations, timelines, and costs[99][102] Results of Operations This section analyzes the company's financial performance, highlighting changes in research and development and selling, general and administrative expenses Comparison of Results for the Three Months Ended June 30 (in thousands) | Item | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $14,982 | $20,563 | ($5,581) | | Selling, general and administrative | $5,526 | $7,985 | ($2,459) | | Net loss | $17,766 | $22,068 | $4,302 | - The decrease in Q2 2022 R&D costs was primarily due to a $4.2 million decrease in clinical trial costs as the ENHANCE program progressed and a $1.9 million decrease in share-based compensation[134] Comparison of Results for the Six Months Ended June 30 (in thousands) | Item | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $32,607 | $34,137 | ($1,530) | | Selling, general and administrative | $12,966 | $17,267 | ($4,301) | | Net loss | $42,603 | $43,358 | $755 | - The decrease in H1 2022 SG&A costs was primarily driven by a $5.7 million decrease in share-based compensation, partially offset by a $2.0 million charge related to the Ligand Agreement modification[141] Liquidity and Capital Resources This section discusses the company's cash position, funding needs, and available capital resources - As of June 30, 2022, the company had cash and cash equivalents of $111.5 million and an accumulated deficit of $306.7 million[11][150] - The company believes its current cash, expected UK tax credits, and available funding from its Term Loan will be sufficient to fund operations through at least the end of 2023[155] - Significant additional capital will be required to advance clinical activities, fund pre-launch and launch costs, and establish a sales and marketing organization for ensifentrine[156] - The company has an "at the market" (ATM) equity offering program with up to $100.0 million, with $99.2 million remaining available for sale as of June 30, 2022[152][153] Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide the information for this item - As a smaller reporting company defined in Rule 12b-2 of the Exchange Act, Verona Pharma is not required to provide quantitative and qualitative disclosures about market risk[162] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the quarter, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[164] - There were no changes in the company's internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[165] PART II - OTHER INFORMATION This section covers other information not included in the financial statements, such as legal proceedings, risk factors, and exhibits Legal Proceedings The company is not currently subject to any material legal proceedings - The company reports that it is not currently subject to any material legal proceedings[166] Risk Factors There have been no material changes to the company's risk factors from those described in its Annual Report on Form 10-K for the year ended December 31, 2021 - The company's risk factors have not materially changed from those disclosed in the 2021 Form 10-K[167] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[168] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes CEO and CFO certifications under Rule 13a-14(a)/15d-14(a) and Section 1350, as well as Inline XBRL documents, filed or furnished herewith[173]