Verona Pharma Plc (LON:VRP) is developing first-in-class drugs to treat unmet medical needs in respiratory disease. Over the last two years’ VRP has reported positive outcomes from a five stage Phase I/IIa programme which has de-risked RPL554 significantly. This drug has been shown to have strong bronchodilatory and anti-inflammatory effects with minimal side effects. New funds will support a broad programme of Phase II trials for maintenance therapy via a nebulizer and hospital use. It will certainly attract the attention of the drug majors. Median prices paid for Phase II respiratory assets have headline valuations of $285m (£190m), equivalent to 19p per share.
► Strategy: Verona Pharma is extremely focused on developing and commercialising its lead drug, RPL554, as quickly as possible for maintenance COPD therapy and treatment of exacerbations. To reach this goal, the company has undertaken a series of Phase I/II clinical trials which have concluded with positive outcomes.
► Phase llb: Having shown RPL554 to be safe, well tolerated and with good evidence of efficacy, the next stage is to perform a broad programme of Phase IIb trials to confirm improved lung function and reduced symptoms, together with secondary benefits regarding hospital stays and readmission rates.
► Funding: VRP has secured funding commitments to raise gross funds of £44.7m through a conditional Placing at 2.873p per share for the purposes of taking RPL554 through initial Phase II trials in COPD. In addition, VRP has undertaken a commitment to list on NASDAQ in the near future which will raise further funds.
► Risks: The main risk is that a product fails in clinical trials. In addition, following clinical development there remains regulatory and commercial risk. However, results from the programme of Phase I/IIa trials have significantly de-risked RPL554 and the new capital has greatly de-risked VRP as an investment.
► Investment summary: Efficacy of PDE inhibitors has never been in doubt. However, over the years’ putative drugs have failed due to side effects. Verona Pharma Plc has overcome this with a new formulation delivered via a nebuliser. With the first tranche of funding secured and a second tranche to be delivered when the company undertakes a listing on NASDAQ, VRP is well positioned for the future.
