VRNA - Verona Pharma: Ensifentrine Vs. Dupixent Ensifentrine Is A Breath Of Fresh Air

2023-04-16 01:22:24 ET

Summary

• Regeneron's Dupixent reported a 30% reduction in COPD exacerbation at week 52, while ensifentrine reported a 36% and 42% reduction in the ENHANCE-1 and ENHANCE-2 trials, respectively.
• Ensifentrine's broader inclusion criteria and lower cost as a small molecule drug make it more accessible and better positioned for wider adoption than Dupixent.
• Verona Pharma faces clinical, regulatory, capital raising, and competitive risks, but its positive data from two pivotal Phase 3 trials supports a buy rating.
• Verona Pharma is expected to submit an NDA by 1H 2023, PDUFA by 1H 2024, and launch in the US by 2H 2024.

Update: where does ensifentrine stand vs. Regeneron's dupixent

On March 23, Regeneron/Sanofi reported data on dupixent's phase 3 COPD trial. Following the recent data readout of Regeneron's Dupixent, a biologic currently being evaluated in two Phase 3 studies for moderate-to-severe COPD patients with Type 2 inflammation, some investors may be concerned about Verona Pharma's (VRNA) potential commercial opportunity. However, we believe that Verona Pharma's ensifentrine has a strong advantage over dupixent and should continue to be a buy based on two reasons:

Firstly, in the Phase 3 ENHANCE-1 and ENHANCE-2 trials, ensifentrine reported a 36% and 42% pbo-adjusted reduction in COPD exacerbation at week 24, respectively. In contrast, dupixent demonstrated a 30% pbo-adjusted reduction in COPD exacerbation at week 52 in the BOREAS trial. Albeit comparing two trials head-to-head may be difficult due to differences in the trial design and baseline characteristics, the absolute placebo-adjusted delta of ensifentrine seems superior. We remind readers that Verona Pharma has already completed its pivotal Phase 3 COPD studies. Topline data from ENHANCE-2 and 1 showed statistically significant and clinically meaningful improvements in lung function, COPD symptoms, and quality of life measures. Ensifentrine's efficacy was consistent in both studies across all subgroups, suggesting broad therapeutic utility.

Secondly, the ENHANCE-1 and 2 trials' broader inclusion criteria for ensifentrine, with no strict requirements for eosinophil count or minimum exacerbation threshold, indicate that ensifentrine is well-positioned for wider adoption. Additionally, being a small molecule drug (nebulized product), ensifentrine is likely to have lower costs, and we expect less resistance from payers (as biologics are usually priced higher and more inconvenient). In contrast, Dupixent, as a biologic drug, is expected to be more expensive, making it less accessible to low-income and uninsured patients residing in rural areas who have poor access to healthcare; we note that those patient populations constitute a significant portion of COPD patients.

Risks

Verona Pharma faces several risks that should be considered by investors. Clinical and regulatory risks are present, as Ensifentrine has not yet received approval, and multiple clinical trials are still ongoing. The company also faces capital raising risk as it is not currently cash flow positive and may need to raise additional capital to fund operations. Additionally, there is a competitive risk as Verona Pharma is a first-time launcher, which may lead to a slower sales ramp than anticipated by the market.

Conclusion

In summary, we believe that Verona Pharma's ensifentrine has a distinct advantage over Dupixent, and recent data on Dupixent should not overly concern investors. With its dual bronchodilatory and anti-inflammatory effects, ensifentrine has a broad range of applications for moderate-to-severe COPD patients and can support premium pricing relative to current nebulizers on the market. Moreover, the drug's broad payer coverage through the Medicare Part B reimbursement channel with low out-of-pocket costs to patients further strengthens its appeal. Thus, we maintain a buy rating on Verona Pharma, particularly after the recent sell-off. It is worth noting that with positive data from two pivotal phase 3 trials (ENHANCE-1/2), we expect Verona Pharma to submit the NDA by 1H 2023, PDUFA by 1H 2024, and approval/US launch by 2H 2024.

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