TIDMVRP
Reported positive Phase 2 data with dry powder inhaler formulation
Post period end, completed enrollment in Phase 2b study with nebulized
ensifentrine as add-on to long-acting bronchodilator
LONDON, Nov. 05, 2019 (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 an operational
update and financial results for the three months and nine months ended
September 30, 2019.
The Company's first-in-class development candidate, ensifentrine, is an
inhaled, dual inhibitor of the enzymes phosphodiesterase 3 and 4 that
acts both as a bronchodilator and an anti-inflammatory agent in a single
compound. Ensifentrine is currently in Phase 2b clinical development for
the maintenance treatment of chronic obstructive pulmonary disease
("COPD") and is planned to enter Phase 3 trials for this indication in
2020. Verona Pharma may also develop ensifentrine for the treatment of
cystic fibrosis and asthma.
OPERATIONAL AND DEVELOPMENT HIGHLIGHTS FOR THE THREE AND NINE MONTH
PERIODSED SEPTEMBER 30, 2019
Three months ended September 30, 2019
-- Reported positive results from the second part of the Phase 2 study of
the Dry Powder Inhaler ("DPI") formulation of ensifentrine in COPD,
delivered by handheld inhaler over one week of twice-daily treatment.
deg The trial met all of its primary and secondary lung function
endpoints. deg The magnitude of improvement in lung function and
duration of action were highly statistically significant and support
twice daily dosing of ensifentrine delivered in a DPI format for the
treatment of COPD. -- Primary endpoint met: peak FEV1 corrected for
placebo showed dose-dependent improvements over baseline of 102 mL for
the 150 ug dose, 175 mL for the 500 ug dose, 180 mL for the 1500 ug dose
and 260 mL for the 3000 ug dose, (p<0.0001 for all doses), all highly
statistically significant. -- Secondary endpoints met: deg
Statistically significant improvements in average FEV1 over 12 hours were
observed over 7 days with all doses (average FEV1 AUC(0-12hr) corrected
for placebo: 36 mL for the 150 ug dose, 90 mL for the 500 ug dose, 80 mL
for the 1500 ug dose and 147 mL for the 3000 ug dose; p<0.05 for all
doses). deg Ensifentrine in a handheld dry powder format was well
tolerated at all doses with an adverse event profile similar to placebo.
The safety profile was comparable to that observed in prior studies with
nebulized ensifentrine.
-- Presented at the European Respiratory Society ("ERS") International
Congress in Madrid, Spain on the positive data from the Phase 2 study of
the DPI formulation of ensifentrine in COPD. deg These single dose data
were first announced in March 2019 and followed by positive multiple dose
data in August 2019 where all the primary and secondary lung function
endpoints were met in the Phase 2 trial. deg The magnitude of
improvement in lung function and duration of action were highly
statistically significant and support twice daily dosing of ensifentrine
for the treatment of COPD.
Post-period end, the Company:
-- Announced that it had completed enrollment in its Phase 2b four-week
dose-ranging study evaluating the effect of nebulized ensifentrine as an
add-on to inhaled tiotropium, a long acting bronchodilator, in patients
with moderate-to-severe COPD. deg Enrollment of 416 patients at 46
sites was completed on schedule with data expected around year end 2019.
deg Preparations underway for End of Phase 2 meeting with the U.S. Food
and Drug Administration ("FDA") expected in the first half of 2020.
deg Commencement of Phase 3 trials expected in 2020.
FINANCIAL HIGHLIGHTS
-- Net cash, cash equivalents and short term investments at September 30,
2019, amounted to GBP41.1 million (December 31, 2018: GBP64.7 million).
-- For the nine months ended September 30, 2019, reported operating loss of
GBP33.7 million (nine months ended September 30, 2018: GBP18.3 million)
and reported loss after tax of GBP24.5 million (nine months ended
September 30, 2018: GBP17.0 million). Operating expenses increased from
GBP18.2 million to GBP33.7 million due primarily to development
activities for ensifentrine.
-- Reported loss per share of 23.3 pence for the nine months ended September
30, 2019 (nine months ended September 30, 2018: 16.1 pence).
-- Net cash used in operating activities for the nine months ended September
30, 2019 was GBP24.5 million (nine months ended September 30, 2018:
GBP13.1 million). The increase in cash used was due to pre-clinical and
clinical studies with ensifentrine and the timing of supplier payments.
"We are very pleased that our four-week Phase 2b dose-ranging clinical
trial with nebulized ensifentrine is progressing according to plan and
that we have completed enrollment of over 400 symptomatic patients with
moderate to severe COPD. We anticipate completing this study around the
end of 2019. Informed by this and prior studies in around 850 subjects,
we plan to advance into our Phase 3 clinical trial program which we
expect to commence in 2020 following an end of Phase 2 meeting with the
FDA," commented Jan-Anders Karlsson, PhD, CEO of Verona Pharma.
"Millions of COPD patients in the US remain symptomatic and breathless
despite being treated with currently available medicines. We believe
ensifentrine, with its unique dual mode of action and bronchodilator and
anti-inflammatory properties, has the potential to become an important
additional treatment option for many of these patients. In particular,
the strong reduction in COPD symptoms will be an attractive feature for
many of these patients. Initially we will focus on nebulized treatment
for more severe patients but we are very excited by the positive DPI
formulation results that support our view that ensifentrine is an
effective bronchodilator in COPD patients, whether administered as a dry
powder via a handheld inhaler or as a suspension via a nebulizer."
GENERAL INFORMATION
Conference Call and Webcast Information
Verona Pharma will host an investment community conference call at 8:00
a.m. Eastern Standard Time (1:00 pm Greenwich Mean Time) on Tuesday,
November 5, 2019. Analysts and investors may participate in the
conference call by utilizing the conference ID: 6498479 and dialing the
following numbers:
-- 866-940-4574 for callers in the United States
-- 0800 028 8438 for callers in the United Kingdom
-- 0800 181 5287 for callers in Germany
A live webcast will be available on the Events and presentations link on
the Investors page of the Company's website at www.veronapharma.com and
an audio replay will be available there for 30 days.
An electronic copy of the interim results will 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.
This press release contains inside information for the purposes of
Article 7 Regulation (EU) No. 596/2014 in relation to revised timelines
for the ongoing Phase 2 study of the pMDI formulation. The person
responsible for its release is Mr Piers Morgan.
About Chronic Obstructive Pulmonary Disease (COPD)
COPD is a progressive and life-threatening respiratory disease without a
cure. The World Health Organization estimates that it will become the
third leading cause of death worldwide by 2030. The condition damages
the airways and the lungs, leading to debilitating breathlessness that
has a devastating impact on performing basic daily activities such as
getting out of bed, showering, eating and walking. In the United States
alone, the total annual medical costs related to COPD are projected to
rise to $49 billion in 2020. About 1.2 million U.S. COPD patients on
dual/triple inhaled therapy (long-acting beta-agonist (LABA)/long-acting
muscarinic antagonist (LAMA) +/- inhaled corticosteroid (ICS)) remain
uncontrolled, experiencing symptoms that impair quality of life. These
patients urgently need better treatments.
About Ensifentrine
Ensifentrine (RPL554) is a first-in-class, inhaled, dual inhibitor of
the enzymes phosphodiesterase 3 and 4 for the treatment of respiratory
diseases. Verona is currently developing three formulations of
ensifentrine for the treatment of COPD: nebulized, dry powder inhaler
(DPI), and pressurized metered-dose inhaler (pMDI). Phase 2 studies of
nebulized ensifentrine in patients with moderate-to-severe COPD have
demonstrated significant and clinically meaningful improvements in both
lung function and COPD symptoms, including breathlessness. Nebulized
ensifentrine also has shown further improved lung function and reduced
lung volumes in patients taking standard of care, short- and long-acting
bronchodilator therapy, including maximum bronchodilator treatment with
dual/triple therapy (LABA/LAMA +/- ICS). Nebulized ensifentrine is
currently in a Phase 2b clinical study evaluating its effect as an
add-on to treatment with a long-acting bronchodilator in patients with
moderate-to-severe COPD, which is expected to be completed around
year-end 2019. Verona Pharma reported positive results from its Phase 2
study of the DPI formulation of ensifentrine in August 2019. Its pMDI
formulation is currently being evaluated in a Phase 2 study, with single
dose data expected in the first quarter of 2020 and final data around
the middle of 2020. Ensifentrine has potential applications in cystic
fibrosis, asthma and other respiratory diseases. It has been well
tolerated in clinical trials involving a total of around 850 people to
date.
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. Verona
Pharma's product candidate, ensifentrine, has the potential to be the
first novel class of bronchodilator in over 40 years, and the first
therapy for the treatment of respiratory diseases that combines
bronchodilator and anti-inflammatory activities in one compound. Verona
Pharma is currently in Phase 2 development of three formulations of
ensifentrine for the treatment of COPD: nebulized, dry powder inhaler,
and pressurized metered-dose inhaler. Ensifentrine also has potential
applications in cystic fibrosis, asthma 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, 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 design of clinical trials and the timing of clinical
trials, trial results and an End of Phase 2 meeting with the FDA,
ensifentrine as the first novel class of bronchodilator in over 40 years
and the first therapy for the treatment of respiratory diseases that
combines bronchodilator and anti-inflammatory activities in one compound,
the efficacy of ensifentrine as a bronchodilator, ensifentrine's symptom
benefit to all COPD patients, the progressive improvement in the
post-hoc analysis of the data from the four-week Phase 2b study
suggesting an anti-inflammatory benefit, the value of ensifentrine for
COPD patients on dual or triple therapy or on maximum standard-of-care
therapy, the number of COPD patients in the United States and China, the
market opportunity for ensifentrine, the number of COPD patients who use
inhalers for maintenance therapy, the expansion of the market for
ensifentrine in a DPI or pMDI formulation and the size of such market,
estimates of medical costs for COPD and it becoming the third leading
cause of death worldwide by 2030, our goal to become a leading fully
integrated biopharmaceutical company, the treatment potential for
ensifentrine in asthma, cystic fibrosis and other respiratory disease,
and strategic collaborations and their value.
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, 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; and lawsuits
related to patents covering ensifentrine and the potential for our
patents to be found invalid or unenforceable.
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 March 19, 2019, 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, operational review, outlook 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.
For further information please contact:
Verona Pharma plc Tel: +44 (0)20 3283 4200
Jan-Anders Karlsson, Chief Executive Officer info@veronapharma.com
Victoria Stewart, Director of Communications
N+1 Singer Tel: +44 (0)20 7496 3000
(Nominated Adviser and UK Broker)
Aubrey Powell / George Tzimas / Iqra Amin (Corporate
Finance)
Mia Gardner (Corporate Broking)
Optimum Strategic Communications Tel: +44 (0)20 3950 9144
(European Media and Investor Enquiries) verona@optimumcomms.com
Mary Clark / Eva Haas / Hollie Vile
Argot Partners
(US Investor enquiries)
Stephanie Marks / Kimberly Minarovich / Michael Tel: +1 212 600 1902
Barron
verona@argotpartners.com
OPERATIONAL REVIEW
Overview
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. Verona
Pharma's product candidate, ensifentrine, has the potential to be the
first novel class of bronchodilator in over 40 years, and the first
therapy for the treatment of respiratory diseases that combines
bronchodilator and anti-inflammatory activities in one compound.
We intend to address the significant unmet medical need in moderate to
severe COPD patients who remain symptomatic despite treatment with dual
bronchodilators (LAMA and LABA) or triple therapy (with the addition of
ICS). Our market research shows that nebulized delivery is the preferred
route of administration for more severe COPD patients, especially in the
U.S., where out of approximately three million COPD patients treated
with dual/ triple inhaled therapy (LAMA/ LABA +/- ICS), about 1.2
million remain uncontrolled, experiencing symptoms that impair quality
of life. These patients urgently need better treatments.
COPD is a progressive respiratory disease with no cure. Few therapeutic
alternatives are available for these patients. The bronchodilator and
anti-inflammatory properties of ensifentrine may be particularly helpful
for these symptomatic patients suffering from chronic cough, excessive
sputum production and breathlessness despite being treated with
currently available medicines.
China is estimated to have at least 70 million COPD patients, with many
still undiagnosed. Importantly, over 90% of medications are prescribed
in hospitals (in contrast to the U.S.) and at least a third of patients
use nebulized drugs. We believe that by 2020 the Chinese COPD and asthma
treated market will exceed 40 million patients. There is an urgent need
for new effective and well-tolerated treatments to address this growing
population.
Verona Pharma is developing ensifentrine for the treatment of COPD,
cystic fibrosis (CF), and asthma and potentially other respiratory
diseases. Ensifentrine has been observed to be well tolerated in
clinical studies to date, having been studied in around 850 subjects in
14 completed clinical trials.
Clinical update
Lead product - nebulized ensifentrine
We are initially developing nebulized ensifentrine for the maintenance
treatment of COPD. In our clinical trials we have observed that
ensifentrine improves lung function in COPD patients when used either as
a stand-alone treatment or as an add-on to treatment with single and
dual bronchodilators. We believe that the addition of nebulized
ensifentrine to symptomatic COPD patients already treated with
standard-of-care medicines represents a very significant market
opportunity.
In May 2019 we initiated a Phase 2b dose-ranging study evaluating
nebulized ensifentrine as an add-on to treatment with a long-acting
bronchodilator in patients with moderate-to-severe COPD. The four-week,
randomized, double-blind, placebo-controlled dose-ranging trial is
designed to evaluate the safety and efficacy of nebulized ensifentrine
as an add-on to inhaled tiotropium, a LAMA commonly used to treat COPD,
and to establish the dosing regimen for a potential Phase 3 program in
COPD.
The primary endpoint of this study is improvement in lung function with
ensifentrine, as measured by the change in peak forced expiratory volume
in one second ("FEV(1) ") from 0 to 3 hours, a standard measure of
exhaled breath volume. Key additional endpoints include measurements of
respiratory symptoms and quality of life via different patient-reported
outcome tools.
On October 17, 2019, we announced that we have completed enrollment for
the Phase 2b study, with 416 COPD patients across 46 sites in the US,
and that data are expected around year end 2019. Preparations are
underway for an End-of-Phase 2 meeting with the U.S. Food and Drug
Administration ("FDA"), which we expect to take place in the first half
of 2020. Subject to the FDA agreeing with our proposed plan, we expect
to commence Phase 3 trials in 2020.
The post-hoc analysis of data from the 4-week Phase 2b (2018) study of
ensifentrine as a maintenance treatment for COPD, published in May 2019
at the ATS 2019 International Conference, showed a significant and
clinically meaningful improvement in symptom scores, measured using the
E-RS scale. This was also observed among patients who did not show a
large improvement in lung function to standard beta(2) -agonist
bronchodilator treatment ('non-reversible' patients, who comprise the
majority of COPD patients). Therefore we believe ensifentrine may offer
a significant symptom benefit to all COPD patients, given that the
symptom improvement we have observed is not necessarily linked to
improvement in lung function. We also believe that the progressive
improvement in symptoms over the four-week period observed in the
post-hoc analysis suggests an anti-inflammatory benefit that would be
additional to that of standard treatment with LAMA or LABA
bronchodilator therapy.
In January 2019, we reported top-line data from a 3-day Phase 2
cross-over trial that enrolled 79 patients to investigate the efficacy
and safety of two different doses (1.5 mg and 6.0 mg, twice daily) of
nebulized ensifentrine on top of an inhaled LAMA/LABA therapy,
tiotropium/olodaterol (Stiolto(R) Respimat(R)), for COPD maintenance
treatment. Each patient received both doses and placebo during the three
treatment periods and about 30% of patients also used stable inhaled
corticosteroid (ICS) therapy throughout the study.
The average improvement in peak FEV(1) on the morning of day 3 with the
1.5 mg dose was observed to be 46 mL, which was not statistically
significant, so the primary endpoint of the study was not met. However,
the average improvement in FEV(1) over the first 4 hours was 50 mL which
was statistically significant (p<0.05). Also, the average improvement in
FEV(1) over 24 hours was statistically significant (p<0.05). A post-hoc
analysis showed that more than 40% of patients reported an improvement
in peak FEV(1) of more than 100 mL, which we believe suggests that a
significant number of COPD patients on dual or triple therapy could
derive a substantial benefit from adding ensifentrine to their therapy.
Importantly, in this and several other clinical trials, ensifentrine
produced clinically relevant and statistically significant improvements
in air trapping (residual volume), both on its own as well as when
administered on top of single or dual bronchodilator treatment. We
believe this may translate into further symptom improvement in these
patients already on maximum standard-of-care therapy.
The learnings from our trials to date, including patient responses,
treatment regimes, as well as endpoints, are being taken into account in
the design of the Phase 3 trials.
We are also developing formulations of ensifentrine in both dry powder
inhaler ("DPI") and pressurized metered-dose inhaler ("pMDI") formats,
for the treatment of COPD patients who prefer administration using a
handheld inhaler device.
Dry powder inhaler ("DPI") formulation
In August 2019, we reported top-line data from our study to evaluate the
ensifentrine DPI formulation in patients with moderate-to-severe COPD
over one week of twice-daily treatment. The trial met all its primary
and secondary lung function endpoints. The magnitude of improvement in
lung function and duration of action were both clinically meaningful and
highly statistically significant and the data support twice daily dosing
of ensifentrine delivered in DPI format for the treatment of COPD.
Peak FEV(1) , corrected for placebo, showed improvements over baseline
of 102 mL for the 150 ug dose, 175 mL for the 500 ug dose, 180 mL for
the 1500 ug dose and 260 mL for 3000 ug dose, (p<0.0001 for all doses),
all highly statistically significant.
Average FEV(1) 0-12h, corrected for placebo, improved by 36 mL for the
150 ug dose, 90 mL for the 500 ug dose, 80 mL for the 1500 ug dose and
147 mL for the 3000 ug dose (p<0.05 for all doses).
Ensifentrine was well tolerated at all doses with an adverse event
profile similar to placebo. The safety profile was comparable to that
observed in prior studies with nebulized ensifentrine.
Metered-dose inhaler ("pMDI") formulation
In June 2019, we commenced a Phase 2 dose-ranging trial to evaluate the
pharmacokinetic ("PK") profile, efficacy and safety of ensifentrine
delivered by pMDI in patients with moderate-to-severe COPD. The trial
has a randomized, double-blind, placebo-controlled, two-part design. We
anticipate reporting data from the first part of the trial in the first
quarter of 2020 and final data around the middle of 2020.
We believe the availability of ensifentrine in handheld inhaler formats
(DPI and pMDI) will greatly expand the market potential for ensifentrine
to the millions of COPD patients who prefer to use handheld devices. In
the U.S., DPI and pMDI handheld inhalers are more commonly used than
nebulizers for medication in COPD.
Other indications
Opportunities also exist to explore the development of ensifentrine for
the treatment of asthma, cystic fibrosis and other respiratory diseases.
Enhancements to the senior team
Verona Pharma deepened the expertise available to the Company through a
number of senior appointments. In April, Dr Martin Edwards was appointed
to the Board as a Non-Executive Director. In June, we announced the
expansion of our senior clinical team to lead and manage the late stage
development of ensifentrine.
OUTLOOK
We intend to become a leading fully integrated biopharmaceutical company,
focused on the treatment of respiratory diseases with significant unmet
medical needs. Our initial focus, the nebulized formulation of
ensifentrine, addresses a clear unmet medical need in moderate-to-severe
COPD patients who remain symptomatic despite treatment with dual
bronchodilators (LAMA and LABA) or triple therapy (with ICS added). We
believe that this is a very large market opportunity in the US and also
in China. In the US, we intend to pursue this market opportunity with a
targeted sales force.
Following completion of the Phase 2b dose-ranging study evaluating
nebulized ensifentrine as an add-on to treatment with inhaled tiotropium
a long acting bronchodilator in patients with moderate-to-severe COPD,
we expect to proceed to an End of Phase 2 meeting with the FDA in the
first half of 2020. We expect to commence its Phase 3 clinical program
with nebulized ensifentrine for the maintenance treatment of COPD in
2020, subject to the FDA's authorization to proceed. We are also
developing ensifentrine for other respiratory diseases including CF and
asthma.
After the positive data from the Phase 2 DPI trial in patients with
moderate-to-severe COPD, which was reported in August, and the
successful development of the pMDI formulation of ensifentrine last year,
which is currently being studied in an ongoing Phase 2 pMDI trial, again
in patients with moderate-to-severe COPD, we believe these formulations
could open up a much larger patient population to ensifentrine
treatment. In the US, our market research suggests that about 5.5
million moderate-to-severe COPD patients currently use either DPI or
pMDI devices for administering their COPD therapies. This market was
valued at approximately $9 billion in 2018.
We may seek strategic collaborations with market leading
biopharmaceutical companies to develop and commercialize the DPI and
pMDI formulations of ensifentrine. We believe that any such
collaborations (the signing and terms of which remain uncertain) could
provide significant funding to advance the development of ensifentrine,
while allowing us to benefit from the development or commercialization
expertise of our collaborators.
Ensifentrine is protected by a broad patent umbrella. We believe that
future medicinal products containing ensifentrine are protected by our
IP beyond 2035. We have retained the worldwide commercialization rights
for ensifentrine.
We have strengthened and expanded our management team and board of
directors during the year, adding further expertise. The Company has
extensive experience in respiratory product development and
commercialization, including from members of our management who were
involved in the development and/or marketing of commercial products such
as Symbicort, Daliresp/Daxas, Flutiform, Advair, Breo Ellipta and Anoro
Ellipta, and thus is favorably positioned for the late-stage development
of ensifentrine.
FINANCIAL REVIEW
Financial review of the nine and three month period ended September 30,
2019
Nine months ended September 30, 2019
Research and Development Costs
Research and development costs were GBP27.8 million for the nine months
ended September 30, 2019, compared to GBP13.6 million for the nine
months ended September 30, 2018, an increase of GBP14.2 million. The
increase was predominantly attributable to a GBP13.4 million increase in
clinical trial expenses relating to four clinical trials (ongoing or in
preparation) of ensifentrine in the nine months ended September 30,
2019, including a four-week 400 patient clinical trial, compared to
three trials in the nine months ended September 30, 2018. Salary costs
increased by GBP1.0 million reflecting the expansion of the clinical
team.
General and Administrative Costs
General and administrative costs were GBP5.9 million for the nine months
ended September 30, 2019, compared to GBP4.6 million for the nine months
ended September 30, 2018, an increase of GBP1.3 million. The increase
was primarily attributable to a GBP0.7 million increase in professional
and market research fees and a GBP0.5 million increase in other overhead
expenses, predominantly salaries and insurance.
Finance Income and Expense
Finance income was GBP3.3 million for the nine months ended September
30, 2019, and GBP1.8 million for the nine months ended September 30,
2018. The increase in finance income was primarily due to a decrease in
the fair value of the warrant liability of GBP2.1 million, because of a
decline in the Company's share price, compared to an increase in the
liability in the nine month period ended September 30, 2018 (which is
recorded as a finance expense). In the prior period, there was a foreign
exchange gain on cash and short term investments of GBP1.2 million,
compared to a gain of GBP0.6 million for the nine months ended September
30, 2019.
Finance expense was GBP0.1 million for the nine months ended September
30, 2019, compared to GBP3.5 million for the nine months ended September
30, 2018. The decrease was due to a GBP3.4 million rise in the value of
the fair value of the warrant liability in the 2018 period, recorded in
finance expense, compared to a decrease in value in the 2019 period
recorded in finance income.
Taxation
Taxation for the nine months ended September 30, 2019, amounted to a
credit of GBP6.0 million compared to a credit of GBP3.0 million for the
nine months ended September 30, 2018, an increase of GBP3.0 million. The
credits are obtained at a rate of 14.5% of 230% of our qualifying
research and development expenditure. The increase in the credit amount
was attributable to our increased expenditure on research and
development, compared to the prior period, and a change in the mix of
recoverable spend.
Cash Flows
Net cash used in operating activities increased to GBP24.5 million for
the nine months ended September 30, 2019, from GBP13.1 million for the
nine months ended September 30, 2018. This was principally due to an
increase in operating costs driven by higher research and development
costs, as well as differences in the timing of supplier payments. During
the nine months ended September 30, 2019, the Company received an R&D
tax credit of GBP4.4 million in respect of its 2018 tax credit on
qualifying research and development expenditure, compared to a receipt
of GBP5.0 million received during the nine months ended September 30,
2018, in respect of the 2017 tax credit.
Net cash generated from investing activities predominantly reflects the
net movement of cash being placed on deposit for more than three months
and such deposits maturing. Deposits of more than three months are
disclosed as short term investments, separately from cash. The increase
in net cash generated in investing activities to GBP38.5 million for the
nine months ended September 30, 2019, from GBP8.6 million for the nine
months ended September 30, 2018 was due to the net movement of funds
from short term investments to cash being greater during the nine months
ended September 30, 2019.
Cash, cash equivalents and short-term investments
Net cash, cash equivalents and short-term investments at September 30,
2019, decreased to GBP41.1 million from GBP64.7 million at December 31,
2018 due to the utilization of cash in ordinary operating activities.
Net assets
Net assets decreased to GBP40.3 million at September 30, 2019, from
GBP62.9 million at December 31, 2018. This was primarily due to losses
generated by the operating activities of the Company.
Three months ended September 30, 2019
The operating loss for the three months ended September 30, 2019, was
GBP13.9 million (September 30, 2018: GBP6.8 million) and the loss after
tax for the three months ended September 30, 2019, was GBP10.1 million
(September 30, 2018: loss of GBP2.3 million).
Research and Development Costs
Research and development costs were GBP12.0 million for the three months
ended September 30, 2019, compared to GBP5.3 million for the three
months ended September 30, 2018, an increase of GBP6.7 million. The
increase was predominantly attributable to a GBP6.4 million increase in
clinical trial expenses relating to three clinical trials of
ensifentrine in the three months ended September 30, 2019 compared to
two trials in the three months ended September 30, 2018. The majority of
the trial costs related to a Phase 2b four week study in approximately
400 patients. Salary costs increased by GBP0.5 million reflecting the
expansion of the clinical team.
General and Administrative Costs
General and administrative costs were GBP2.0 million for the three
months ended September 30, 2019, compared to GBP1.4 million for the
three months ended September 30, 2018, an increase of GBP0.6 million.
The increase was attributable to a GBP0.3 million increase in commercial
market research costs and GBP0.3 million in other overhead costs,
predominantly salaries and insurance.
Finance Income and Expense
Finance income was GBP1.2 million for the three months ended September
30, 2019, and GBP3.3 million for the three months ended September 30,
2018. Finance income in the three months ended September 30, 2019
comprised GBP0.4 million in relation to the decrease in the fair value
of the warrant liability, due to a fall in the Company's share price,
compared to a GBP2.6 million decrease in the prior period, together with
a GBP0.7 million foreign exchange gain on cash and short term
investments in the three months ended September 30, 2019 compared to a
GBP0.5 million gain in the prior period.
Finance expense was GBP46 thousand for the three months ended September
30, 2019, as compared to GBP27 thousand for the three months ended
September 30, 2018.
Taxation
Taxation for the three months ended September 30, 2019, amounted to a
credit of GBP2.6 million compared to a credit of GBP1.1 million for the
three months ended September 30, 2018, a reflection of the higher
research and development costs in the current period.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
AS OF SEPTEMBER 30, 2019, AND DECEMBER 31, 2018
As of As of
Notes September 30, 2019 December 31, 2018
--------------------- --------------------
GBP'000s GBP'000s
ASSETS
Non-current assets:
Goodwill 441 441
Intangible assets 2,241 2,134
Property, plant and
equipment 1,141 21
Total non-current
assets 3,823 2,596
----------------- ----------------
Current assets:
Prepayments and other
receivables 3,486 2,463
Current tax receivable 6,177 4,499
Short term investments 10 7,242 44,919
Cash and cash
equivalents 33,823 19,784
----------------
Total current assets 50,728 71,665
----------------- ----------------
Total assets 54,551 74,261
================= ================
EQUITY AND LIABILITIES
Capital and reserves
attributable to equity
holders:
Share capital 5,266 5,266
Share premium 118,862 118,862
Share-based payment
reserve 9,789 7,923
Accumulated loss (93,634) (69,117)
----------------- ----------------
Total equity 40,283 62,934
----------------- ----------------
Current liabilities:
Derivative financial
instrument 11 415 2,492
Lease liability 440 --
Trade and other
payables 11,605 7,733
Total current
liabilities 12,460 10,225
----------------- ----------------
Non-current
liabilities:
Assumed contingent
obligation 12 1,096 996
Non-current lease
liability 640 --
Deferred income 72 106
Total non-current
liabilities 1,808 1,102
----------------- ----------------
Total equity and
liabilities 54,551 74,261
================= ================
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 NINE MONTHSED SEPTEMBER 30, 2019, AND SEPTEMBER
30, 2018 (UNAUDITED)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
Notes 30, 2019 30, 2018 30, 2019 30, 2018
------------ ------------ ------------ ------------
GBP'000s GBP'000s GBP'000s GBP'000s
Research and development costs (11,971) (5,346) (27,815) (13,649)
General and administrative costs (1,972) (1,417) (5,933) (4,647)
-------- ------- -------- --------
Operating loss (13,943) (6,763) (33,748) (18,296)
Finance income 7 1,223 3,331 3,311 1,841
Finance expense 7 (46) (27) (119) (3,463)
-------- ------- -------- --------
Loss before taxation (12,766) (3,459) (30,556) (19,918)
Taxation -- credit 8 2,620 1,119 6,032 2,966
-------- ------- --- -------- --------
Loss for the period (10,146) (2,340) (24,524) (16,952)
Other comprehensive income:
Items that might be subsequently reclassified to profit
or loss
Exchange differences on translating foreign operations 26 9 27 24
-------- ------- --- -------- --------
Total comprehensive loss attributable to owners of
the Company (10,120) (2,331) (24,497) (16,928)
======== ======= ======== ========
Loss per ordinary share -- basic and diluted (pence) 9 (9.6) (2.2) (23.3) (16.1)
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 NINE MONTHSED SEPTEMBER 30, 2019, AND SEPTEMBER 30, 2018
(UNAUDITED)
Share- Total
Share Share based Accumulated Total
Note Capital Premium Expenses Losses Equity
-------- -------- --------- -------------- ----------
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance at
January 1,
2018 5,251 118,862 5,022 (49,254) 79,881
Loss for the
period -- -- -- (16,952) (16,952)
Other
comprehensive
income for the
year:
Exchange
differences
on
translating
foreign
operations -- -- -- 24 24
-------- -------- --------- --------- --- -------
Total
comprehensive
loss for the
period -- -- -- (16,928) (16,928)
New share
capital
issued 15 -- -- -- 15
Share-based
payments -- -- 2,231 -- 2,231
-------- -------- --------- --------- --- -------
Balance at
September 30,
2018 5,266 118,862 7,253 (66,182) 65,199
======== ======== ========= ========= =======
Balance at
January 1,
2019, as
previously
reported 5,266 118,862 7,923 (69,117) 62,934
Impact of
change in
accounting
policy 3 -- -- -- (20) (20)
---------
Adjusted
balance at
January 1,
2019 5,266 118,862 7,923 (69,137) 62,914
-------- -------- --------- --------- -------
Loss for the
period -- -- -- (24,524) (24,524)
Other
comprehensive
income for the
year:
Exchange
differences
on
translating
foreign
operations -- -- -- 27 27
-------- -------- --------- --------- --- -------
Total
comprehensive
loss for the
period -- -- -- (24,497) (24,497)
Share-based
payments -- -- 1,866 -- 1,866
-------- -------- --------- --------- --- -------
Balance at
September 30,
2019 5,266 118,862 9,789 (93,634) 40,283
======== ======== ========= ========= =======
The accompanying notes form an integral part of these condensed
consolidated financial statements.
The currency translation reserve for September 30, 2019, and September
30, 2018, 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 CASH FLOWS FOR
THE NINE MONTHSED SEPTEMBER 30, 2019, AND SEPTEMBER 30, 2018
(UNAUDITED)
Nine Nine
Months Months
Ended Ended
September September
30, 2019 30, 2018
---------- ------------
GBP'000s GBP'000s
Cash used in operating activities:
Loss before taxation (30,556) (19,918)
Finance income (3,311) (1,841)
Finance expense 119 3,463
Share-based payment charge 1,866 2,231
Increase in prepayments and other receivables (1,236) (223)
Increase / (decrease) in trade and other payables 3,852 (1,434)
Depreciation of property, plant and equipment 274 6
Unrealized foreign exchange gains 15 --
Amortization of intangible assets 77 66
--------- ---------
Cash used in operating activities (28,900) (17,650)
Cash inflow from taxation 4,361 4,594
--------- ---------
Net cash used in operating activities (24,539) (13,056)
--------- ---------
Cash flow from investing activities:
Interest received 827 681
Purchase of plant and equipment (21) (1)
Payment for patents and computer software (184) (235)
Transfer to short term investments (7,240) (44,716)
Maturity of short term investments 45,134 52,854
--------- ---------
Net cash generated in investing activities 38,516 8,583
--------- ---------
Cash flow from financing activities:
Payment of lease liabilities (296) --
--------- ---------
Net cash used in financing activities (296) --
--------- ---------
Net increase / (decrease) in cash and cash
equivalents 13,681 (4,473)
Cash and cash equivalents at the beginning of the
period 19,784 31,443
Effect of exchange rates on cash and cash
equivalents 358 591
--------- ---------
Cash and cash equivalents at the end of the period 33,823 27,561
========= =========
VERONA PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE NINE MONTHSED SEPTEMBER 30, 2019
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 Depositary Shares 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 nine months ended
September 30, 2019, 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, 2018.
The 2018 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
November 6, 2019. There have been no changes, other than the adoption of
IFRS 16, to the accounting policies as contained in the annual
consolidated financial statements as of and for the year ended December
31, 2018, which have been prepared in accordance with international
financial reporting standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB").
The interim condensed consolidated financial statements have been
prepared on a going-concern basis. Management, having reviewed the
future operating costs of the business in conjunction with cash and
short term investments held as of September 30, 2019, believes the Group
has sufficient resources to fund planned research and development
activities, including the initiation of Phase 3 trials, until September
30, 2020. The Group will need to raise additional funds in order to
continue its activities at this point.
The Group continues to seek additional funding through public or private
financing, license agreements, debt finance, collaboration agreements
and other arrangements. While Management has reasonable expectations
that the Group will obtain the required finance, there is no guarantee
that the Group will be successful securing additional finance on
acceptable terms, or at all. Raising sufficient funds to fund planned
research and development activities, including Phase 3 trials, is likely
to be dependent on continuing to report positive data from clinical
trials in a timely manner.
Should the Group be unable to raise sufficient additional funds it will
be required to curtail planned research and development activities,
including initiating Phase 3 trials, until such funding can be obtained.
The Group's activities and results are not exposed to seasonality. The
Group operates as a single operating and reportable segment.
Dividend
The Directors do not recommend the payment of a dividend for the nine
months ended September 30, 2019, (nine months ended September 30, 2018:
GBPnil and the year ended December 31, 2018: GBPnil).
3. Change in accounting policy: adoption of IFRS 16
IFRS 16 'Leases' is effective for accounting periods beginning on or
after January 1, 2019, and replaces IAS 17 'Leases'. It eliminates the
classification of leases as either operating leases or finance leases
and, instead, introduces a single lessee accounting model. The adoption
of IFRS 16 resulted in the Group recognizing lease liabilities within
current liabilities, and corresponding 'right-of-use' assets for the
arrangements within property plant and equipment that were previously
classified as operating leases.
The Group's principal lease arrangements are for office buildings. The
Group has adopted IFRS 16 retrospectively with the cumulative effect of
initially applying the standard as an adjustment to the opening balance
of retained earnings at January 1, 2019. The standard permits a choice
on initial adoption, on a lease-by-lease basis, to measure the
right-of-use asset at either its carrying amount as if IFRS 16 had been
applied since the commencement of the lease, or an amount equal to the
lease liability, adjusted for any accrued or prepaid lease payments. The
Group has elected to measure the right-of-use asset at its carrying
value as if IFRS 16 had been applied since the commencement of the lease,
with the result of a GBP20 thousand reduction in opening total
accumulated losses.
Initial adoption has resulted in the recognition of right-of-use assets
of GBP325 thousand and lease liabilities of GBP316 thousand and the
reclassification of prepaid lease rentals of GBP29 thousand.
As of
January 1, 2019
------------------
GBP'000s
Operating lease commitments (including prepayments)
disclosed as at December 31, 2018 600
Less: adjustments relating to prepaid lease payments (29)
-------------
Operating lease commitments as at December 31, 2018 571
------------- ---
Discounted using the group's incremental borrowing
rate 526
Less: short-term leases recognized on a straight-line
basis as expense (210)
Lease liability recognized as at January 1, 2019 316
============= ===
In applying IFRS 16 for the first time, the group has used the following
practical expedients permitted by the standard:
-- the use of a single discount rate of 8% to a portfolio of leases with
reasonably similar characteristics;
-- accounting for operating leases with a remaining lease term of less than
12 months as at January 1, 2019, as short-term leases;
-- the use of hindsight in determining the lease term where the contract
contains options to extend or terminate the lease; and
-- excluding initial direct costs from the initial measurement of the
right-of-use asset.
The Group is applying IFRS 16's low-value and short-term exemptions. The
adoption of IFRS 16 has had no impact on the Group's net cash flows,
although a presentation change has been reflected in 2019 whereby cash
outflows of GBP296 thousand are now presented as financing, instead of
operating. There is a decrease of GBP34 thousand in general and
administrative costs as depreciation of the right of use asset is less
than the lease costs and a GBP30 thousand increase in finance expense
from the presentation of a portion of lease costs as interest costs.
There is no significant impact on overall loss before tax and loss per
share.
In the period the Group agreed extensions to the leases. As a result it
recognized an additional liability and right-of-use asset of GBP1,046
thousand.
4. 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.
5. 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,
2018.
6. Estimates
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, 2018. In addition the company carried out a
value in use impairment review.
Impairment of intangible assets, goodwill and non-financial assets
The Company notes that after the reduction in its share price since
December 31, 2018, at various points in the three months to March 31,
2019, the market value of the Company was less than its net book value.
The Company therefore carried out an impairment review as at March 31,
2019. From market research management assessed, among other inputs,
potential patient numbers from likely physician prescribing patterns,
price points, the time from possible launch to peak sales, script
rejection, attrition rates and probability of success. Management also
carried out a sensitivity analysis on key assumptions and assessed that
a reasonable change in these assumptions would not lead to the value in
use falling below net book value. Consequently, management determined
that the Company's value in use exceeded the carrying value of the
Company's assets and that no impairment was required.
At various other points in the nine months to September 30, 2019, the
market value of the Company was less than its net book value.
Consequently, management re-performed the impairment review as at
September 30, 2019, and identified no changes to market conditions, the
competitive landscape, market research insights or other factors that
would change its conclusions. Consequently, management determined that
the Company's value in use exceeded the carrying value of the Company's
assets and that no impairment was required.
7. Finance income and expense
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2019 2018 2019 2018
-------------- -------------- -------------- ----------------
GBP'000s GBP'000s GBP'000s GBP'000s
Finance income:
Interest received on cash balances 180 238 659 611
Foreign exchange gain on translating foreign currency
denominated bank balances 689 502 575 1,230
Fair value adjustment on derivative financial instruments
(note 11) 354 2,591 2,077 --
-------------- --------------
Total finance income 1,223 3,331 3,311 1,841
============== ============== ============== ==============
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2019 2018 2019 2018
-------------- -------------- -------------- ----------------
GBP'000s GBP'000s GBP'000s GBP'000s
Finance expense:
Fair value adjustment on derivative financial instruments
(note 11) -- -- -- 3,385
Interest on discounted lease liability 15 -- 30 --
Unwinding of discount factor movements related to
the assumed contingent arrangement (note 12) 31 27 89 78
-------------- -------------- -------------- --------------
Total finance expense 46 27 119 3,463
============== ============== ============== ==============
8. Taxation
The tax credit for the nine month period ended September 30, 2019,
amounts to GBP6.0 million and consists of the estimated research and
development tax credit receivable on qualifying expenditure incurred
during the nine month period ended September 30, 2019 for an amount of
GBP6.1 million less a tax expense of GBP35 thousand related to the US
operations (nine month period ended September 30, 2018: GBP3.0 million
tax credit, comprising GBP3.0 million for research and development tax
credit, less GBP35 thousand expense for tax on US operations).
The tax credit for the three month period ended September 30, 2019,
amounts to GBP2.6 million, and consists of the estimated research and
development tax credit receivable on qualifying expenditure incurred
during the three month period ended September 30, 2019 for an amount of
GBP2.6 million less a tax expense of GBP16 thousand related to the US
operations (three month period ended September 30, 2018: GBP1.1 million
tax credit, comprising GBP1.1 million for research and development tax
credit, plus tax credit GBP28 thousand expense for tax on US
operations).
9. Loss per share calculation
For the nine months ended September 30, 2019, the basic loss per share
of 23.3p (September 30, 2018: loss of 16.1p) is calculated by dividing
the loss for the nine months ended September 30, 2019 by the weighted
average number of ordinary shares in issue of 105,326,638 during the
nine months ended September 30, 2019 (September 30, 2018: 105,038,800).
Since the Group has reported a net loss, diluted loss per ordinary share
is equal to basic loss per ordinary share.
For the three months ended September 30, 2019, the basic loss per share
of 9.6p (September 30, 2018: 2.2p) is calculated by dividing the loss
for the three months ended September 30, 2019 (loss for September 30,
2018) by the weighted average number of ordinary shares in issue of
105,326,638 during the three months ended September 30, 2019 (September
30, 2018: 105,080,903).
Each ADS represents 8 ordinary shares of the Company, so the profit or
loss per ADS in any period is equal to 8 times the profit or loss per
share.
10. Short term investments
Short term investments as at September 30, 2019 amounted to a total of
GBP7.2 million (December 31, 2018: GBP44.9 million) and consisted of
fixed term deposits in both US Dollars and UK Pounds.
11. Derivative financial instrument
Pursuant to the July 2016 placement the Company issued 31,115,926 units
to new and existing investors at the placing price of GBP1.4365 per unit,
each of which was comprised of one ordinary share and one warrant. The
warrant holders can subscribe for 0.4 of an ordinary share at a per
share exercise price of 120% of the placing price (GBP1.7238). The
warrant holders can opt for a cashless exercise of their warrants by
choosing 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 shares. The warrants were therefore classified as
a derivative financial liability, since their exercise might result in a
variable number of shares to be issued. The warrants expire on May 2,
2022.
At September 30, 2019, and December 31, 2018, warrants over 12,401,262
shares were in effect.
As of September As of December
30, 2019 31, 2018
------------------- ------------------
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 0.30% 0.76%
Remaining term to exercise 2.59 years 3.34 years
Annualized volatility 60.98% 60.72%
Dividend rate 0.00% 0.00%
Dilution discount 8.55% 5.66%
As at September 30, 2019, the Group updated the underlying assumptions
and calculated a fair value of these warrants, using the Black-Scholes
pricing model (including level 3 assumptions), amounting to GBP0.4
million.
The variance for the nine month period ending September 30, 2019, was
GBP2.1 million (nine month period ending September 30, 2018: GBP3.4
million) and is recorded as finance income (September 30, 2018, recorded
in finance expense) in the Consolidated Statement of Comprehensive
Income.
Derivative Derivative
financial financial
instrument instrument
----------- -------------
2019 2018
----------- -------------
GBP'000s GBP'000s
As of January, 1 2,492 1,273
Fair value adjustments recognized in profit or
loss (2,077) 3,385
---------- -----------
As of September, 30 415 4,658
========== ===========
For the amount recognized as at September 30, 2019, 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 696
Base case, reported fair value 415
Variable down 199
12. Assumed contingent obligation related to the business combination
The value of the assumed contingent obligation as of September 30, 2019,
amounted to GBP1,096 thousand (December 31, 2018: GBP996 thousand). The
increase in value of the assumed contingent obligation during the nine
months ended September 30, 2019, amounted to GBP100 thousand (nine
months ended September 30, 2018: GBP87 thousand) and the unwinding of
the discount on the liability was recorded in finance expense. Periodic
re-measurement is triggered by changes in the probability of success.
The discount percentage applied is 12%. In 2018 and the nine months
ended September 30, 2019, there were no events that triggered
remeasurement.
2019 2018
-------- ----------
GBP'000s GBP'000s
January 1 996 875
Impact of changes in foreign exchange rates 11 9
Unwinding of discount factor 89 78
-------- --------
September 30 1,096 962
======== ========
There is no material difference between the fair value and carrying
value of the financial liability.
For the amount recognized as at September 30, 2019, of GBP1,096 thousand,
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):
Discount rate Revenue
(up / down (up / down
1 % pt) 10 % pts)
GBP'000s GBP'000s
Variable up 1,081 1,155
Base case, reported fair value 1,096 1,096
Variable down 1,163 1,087
13. Share option scheme
During the nine months ended September 30, 2019 the Company granted a
total of 4,349,050 share options and 740,496 Restricted Stock Units
("RSUs") (nine months ended September 30, 2018, the Company granted
2,090,847 share options, and 273,390 RSUs).
The movement in the number of the Company's share options is set out
below:
Weighted Weighted
average average
exercise exercise
price 2019 price 2018
--------- ----------- --------- ------------
GBP GBP
Outstanding at
January 1 1.53 8,752,114 1.53 7,527,457
Granted during
the period 0.57 4,349,050 1.46 2,090,847
Expired during
the period 2.00 (19,998) -- --
Forfeited during
the period 0.79 (43,723) 1.43 (799,524)
---------
Outstanding
options at
September 30 1.21 13,037,443 1.53 8,818,780
========== =========
The movement in the number of the Company's RSUs is set out below:
2019 2018
--------- ------------
Outstanding at January 1 862,473 1,052,236
Granted during the period 740,496 273,390
Exercised during the period -- (309,237)
Forfeited during the period -- (153,916)
Outstanding RSUs at September 30 1,602,969 862,473
========= =========
The share--based payment expense for the nine months ended September 30,
2019, was GBP1.9 million (nine months ended September 30, 2018: GBP2.2
million). In the nine months ended September 30, 2018, 799,524 unvested
options and 153,916 RSUs were forfeited. Previously GBP370 thousand had
been recognized in the statement of comprehensive income relating to
their fair value; in the nine months ended September 30, 2018, this
charge was reversed.
The options and RSUs granted during the nine months ended September 30,
2019, were awarded under the Company's 2017 Incentive Plan with total
fair values estimated using the Black Scholes option pricing model of
GBP1.9 million. The cost is amortized over the vesting period of the
options and the RSUs on a straight-line basis. The following assumptions
were used for the Black--Scholes valuation of share options and RSUs
granted in the nine months ended September 30, 2019.
Share options RSUs
Issued in the nine months ended Issued in the nine months ended
September 30, 2019 September 30, 2019
------------------------------- -------------------------------
Options /
RSUs
granted 4,349,050 740,496
Risk--free
interest
rate 0.39% - 0.82% 0.76% - 0.82%
Expected
life of
options /
RSUs 5.5 - 7 years 1 - 5 years
Annualized
volatility 64.85% - 69.71% 67.98% - 69.71%
Dividend
rate 0.00% 0.00%
Vesting 1 to 4 years 1 to 5 years
period
14. Related party transactions
Dr David Ebsworth, Chairman of the Company, purchased 147,600 ordinary
shares for GBP80 thousand from the market in the period.
Piers Morgan, Chief Financial Officer of the Company, and his spouse
purchased 88,415 ordinary shares in total for GBP53 thousand from the
market in the period.
At December 31, 2018, there was a receivable of GBP126 thousand due from
one director and two key management personnel relating to tax due on
RSUs that vested in the year ended December 31, 2018. Of this, GBP93
thousand was repaid with interest in the quarter and GBP33 thousand
relating to the Company's National Insurance obligation was settled by
the Company.
In the period a director provided consultancy services for GBP15
thousand (nine months to September 30, 2018: GBP22 thousand).
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
September 30, 2019, and for the three and nine month periods ended
September 30, 2019 into US dollars at the noon buying rate of the
Federal Reserve Bank of New York on September 30, 2019, which was
GBP1.00 to $1.2305. These translations should not be considered
representations that any such amounts have been, could have been or
could be converted into US 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 NINE MONTHSED SEPTEMBER 30, 2019 (UNAUDITED)
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 2019 September 30, 2019 September 30, 2019 September 30, 2019
--------------------- --------------------- --------------------- ---------------------
GBP'000s $'000s GBP'000s $'000s
Research and development costs (11,971) (14,730) (27,815) (34,226)
General and administrative costs (1,972) (2,427) (5,933) (7,301)
------------ ------ ------------ ------ ------------ ------ ------------ ------
Operating loss (13,943) (17,157) (33,748) (41,527)
Finance income 1,223 1,505 3,311 4,074
Finance expense (46) (57) (119) (146)
------------ ------ ------------ ------ ------------ ------ ------------ ------
Loss before taxation (12,766) (15,709) (30,556) (37,599)
Taxation -- credit 2,620 3,224 6,032 7,422
------------ ------- ------------ ------- ------------ ------- ------------ -------
Loss for the period (10,146) (12,485) (24,524) (30,177)
Other comprehensive income:
Items that might be subsequently reclassified to profit
or loss
Exchange differences on translating foreign operations 26 32 27 33
------------ ------- ------------ ------- ------------ ------- ------------ -------
Total comprehensive loss attributable to owners of
the Company (10,120) (12,453) (24,497) (30,144)
============ ====== ============ ====== ============ ====== ============ ======
Loss per ordinary share -- basic (pence / cents) (9.6) (11.9) (23.3) (28.7)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT SEPTEMBER
30, 2019, AND DECEMBER 31, 2018 (UNAUDITED)
As of As of As of
September 30, 2019 September 30, 2019 December 31, 2018
--------------------- --------------------- --------------------
GBP'000s $'000s GBP'000s
ASSETS
Non-current
assets:
Goodwill 441 544 441
Intangible
assets 2,241 2,758 2,134
Property,
plant and
equipment 1,141 1,404 21
Total
non-current
assets 3,823 4,706 2,596
--------------- ---- --------------- ---- --------------- ---
Current
assets:
Prepayments
and other
receivables 3,486 4,290 2,463
Current tax
receivable 6,177 7,601 4,499
Short term
investments 7,242 8,911 44,919
Cash and cash
equivalents 33,823 41,619 19,784
Total current
assets 50,728 62,421 71,665
--------------- ---- --------------- ---- --------------- ---
Total assets 54,551 67,127 74,261
=============== ==== =============== ==== =============== ===
EQUITY AND
LIABILITIES
Capital and
reserves
attributable
to equity
holders:
Share capital 5,266 6,480 5,266
Share premium 118,862 146,260 118,862
Share-based
payment
reserve 9,789 12,045 7,923
Accumulated
loss (93,634) (115,217) (69,117)
--------------- --- --------------- --- ---------------
Total equity 40,283 49,568 62,934
--------------- ---- --------------- ---- --------------- ---
Current
liabilities:
Derivative
financial
instrument 415 511 2,492
Finance lease
liabilities 440 541 --
Trade and
other
payables 11,605 14,281 7,733
Total current
liabilities 12,460 15,333 10,225
--------------- ---- --------------- ---- --------------- ---
Non-current
liabilities:
Assumed
contingent
obligation 1,096 1,349 996
Non-current
lease
liability 640 788 --
Deferred
income 72 89 106
Total
non-current
liabilities 1,808 2,226 1,102
--------------- ---- --------------- ---- --------------- ---
Total equity
and
liabilities 54,551 67,127 74,261
=============== ==== =============== ==== =============== ===
(END) Dow Jones Newswires
November 05, 2019 02:00 ET (07:00 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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