VRNA - Verona Pharma: Revolutionizing COPD With First Triple Mechanism Inhaled Drug

2023-05-18 18:51:15 ET

Summary

• Verona Pharma plc's Ensifentrine is the first drug that combines bronchodilation and anti-inflammatory effects in COPD.
• Phase 3 data showed that the drug showed a 40% pooled reduction in the rate of exacerbations compared to the placebo.
• Verona Pharma is preparing to submit a New Drug Application, or NDA, for the approval of the drug as a maintenance treatment for COPD this quarter.
• Based on the strong data, I expect the NDA to be approved, and the PDUFA is likely to be scheduled in H1 next year, a price-moving catalyst for Verona Pharma plc.

Verona Pharma plc ( VRNA ) was founded in 2005 and is headquartered in the United Kingdom. The company is focused on developing products for the treatment of chronic obstructive pulmonary disease, COPD, and asthma.

COPD is the fourth-largest cause of death in the United States. It affects 16 million Americans, and its treatments constitute a $10 billion per year U.S. revenue market.

Currently, the maintenance treatment of COPD consists of inhaled bronchodilators, like beta-agonists and muscarinic antagonists. In spite of these medications, most patients with COPD continue to have breakthrough exacerbations. 40% of COPD patients remain symptomatic despite the use of currently approved medications. COPD causes 740,000 annual hospitalizations in the US and $50 billion/year in direct or indirect costs.

Verona Pharma's drug Ensifentrine has three key mechanisms in respiratory disease, causing: bronchodilation; anti-inflammatory effects; and increased mucociliary clearance. It is the first drug that combines bronchodilation and anti-inflammatory effects in COPD.

Results of two phase 3 clinical trials, ENHANCE-1 and ENHANCE-2 showed successful results with statistically significant improvements in pulmonary function as measured by peak FEV1 versus the placebo. In addition, the drug showed a 40% pooled reduction in the rate of exacerbations compared to the placebo. The time to the first exacerbation was delayed by 41% across both phase 3 trials. The treatment was also safe and well tolerated.

Verona Pharma plc is preparing to submit a New Drug Application ((NDA)) for the approval of the drug as a maintenance treatment for COPD this quarter. Based on the strong data, I expect the NDA to be approved and a PDUFA date to be scheduled in the first half of next year.

Ensifentrine is likely to be added to the top of currently approved medications in patients who continue to have symptoms. These constitute about 2 million patients with COPD just in the U.S. The drug has the potential for exceeding the sales of the triple therapy in COPD, which has peak projections of $3 billion in annual U.S. sales. In addition, the company has partnered with Nuance Pharma in China for the commercialization of the drug, where the peak annual revenue potential is $1 billion and Verona will get tiered double-digit royalties on the sales. The company owns various patents for the drug through the mid-2030s.

The company CEO, David Zaccardelli, served as the president and CEO of Dova Pharmaceuticals, which was acquired by Swedish Orphan Biovitrum. He also acted as the acting CEO of Cempra, and served in several senior management roles at United Therapeutics, including COO, and Chief Manufacturing Officer.

Cash reserves were $228 million at the end of Q1 this year and are enough through 2025. The current operating cash burn rate is $7.8 million in the last quarter but is expected to increase when the drug is launched next year for the purpose of marketing and commercialization. Verona Pharma plc had long-term debt of $9.8 million at the end of Q1 this year.

The company's stock is owned by prominent institutional holders like RA Capital, NEA, OrbiMed Advisors, and Perceptive Advisors. The company stock popped to $26 last year after the phase 3 data and has pulled back since then. The average Wall Street analyst price target on the stock is $31 or 65% upside potential. I bought Verona Pharma plc stock earlier today and plan to hold through the NDA early next year, targeting $30.

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Risks in the Verona Pharma plc investment include the FDA not accepting the NDA due to unforeseen issues. The drug's sales may disappoint. This may cause Verona Pharma plc stock to fall. Investing in biotech/pharma stocks is risky and may not be suitable for all investors. This note represents my own opinion and is not professional investment advice. Please conduct your own research before any investing decision.

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