Verona Pharma Plc (LON:VRP) is developing first-in-class drugs that treat unmet medical needs in respiratory disease. RPL554 is being fast-tracked to commercialisation by focusing on a $3.2bn market segment poorly serviced by existing drugs. Four out of five trials in the clinical development programme have been completed with positive outcomes, with the fifth due to report in 2Q’16. To date, RPL554 has been shown to have a strong bronchodilatory effect with minimal side effects and will certainly be attracting the attention of drug majors. Median prices paid for Phase II respiratory assets have headline valuations of $285m (£190m), equivalent to 19p per share.
► RPL554 in asthma: VRP has reported positive outcomes from a Phase IIa trial of nebulised RPL554 in 29 mild-to-moderate asthma patients which commenced in June 2015 and was fully recruited by early November 2015. This complex cross-over study compared RPL554 with two doses of salbutamol, or placebo.
► Outcome: The bronchodilatory effect of RPL554 was equivalent to that seen with the highest dose of nebulised salbutamol used to treat an asthma attack. No GI side effects or CV effects of concern were observed. These results suggest that RPL554 could be a useful addition for treating respiratory disease.
► Results: A more complete data set will be presented at a respiratory conference in May, by which time, Verona is also likely to have released data from its Phase IIa trial in COPD patients to identify if RPL554 has an additive broncholdilatory effect. These trials are all contributing significantly to the de-risking of RPL554
► Valuation: About £18m has been invested in R&D to get Verona Pharma Plc where it is today, compared to an EV of £34m. This positive outcome, coupled with the potential Phase IIa results in COPD, represents a major value inflection point and will progress the interest of the drug majors towards a commercial licensing deal.
► Investment summary: Historically, efficacy of PDE inhibitors has been positive, but putative drugs have failed due to side effects. To date, results with the new formulation of RPL554 have exceeded expectations, which augurs well for the pivotal Phase IIb trial due to start in early 2017. With big pharma constantly searching for new respiratory assets, RPL554 will definitely be on the radar.
