Pharma Stock Nears FDA Approval
Research Report

Jefferies & Co. analyst Andrew Tsai, in a research report published on May 9, 2024, expressed high confidence in the upcoming FDA approval of Verona Pharma Plc.'s (VRNA:NASDAQ;VRP:LON) ensifentrine, a novel PDE3/4 nebulizer for the treatment of chronic obstructive pulmonary disease (COPD). The analyst believes that VRNA stock could climb 10-30% on a positive label and favorable wholesale acquisition cost (WAC) price.

"We are in the final stretch of ensifentrine's (novel PDE3/4 nebulizer) NDA review for COPD lung disease (June 26th PDUFA), and think VRNA stock could climb +10-30% on a (+) label and favorable WAC price," Tsai stated. "Net-net, US$1B+ peak sales x 3x multiple x 90%+ PoS = US$3B valuation (up from US$1.2B cap)."

The analyst highlighted that recent physician checks signal a high awareness of ensifentrine and a real intent to prescribe the drug immediately, reassuring Jefferies about the 2024-25 launch trajectory.

Tsai believes that ensifentrine has the key attributes of a commercially successful drug for symptomatic COPD, which affects up to 50% of the 8.5M+ U.S. patients. These attributes include its novel mechanism of action (the first in over 10+ years), robust efficacy across two positive pivotal studies, and placebo-like safety. "Importantly, Ensi could expand the US$10B+ branded market (rather than take share) since the drug will likely be prescribed as an add-on to existing COPD therapies — which are limited to just three primary drug classes currently," Tsai noted.

The analyst remains 90%+ confident in an FDA approval and foresees a favorable label and price for ensifentrine. Tsai pointed out that Dupixent's June 27 PDUFA, a day after ensifentrine's action date, could be delayed by three months due to additional Phase III analyses required by the FDA, which could have a positive read-across to ensifentrine.

Tsai also highlighted that the FDA has indicated no AdCom for ensifentrine on at least two occasions, and the company is nearing final labeling discussions. "Historical approval precedents would suggest FEV, exacerbation, and quality-of-life (QoL) findings could be included in the label (e.g., SGRQ, E-RS)," Tsai added.

The analyst spoke to three pulmonologists to gauge their intent to prescribe ensifentrine, finding several commonalities. The physicians are well aware of the drug, view it as a novel and convenient add-on COPD therapy, and expect to prescribe it to triple therapy patients initially. "At peak, they could prescribe Ensi to 5-20% of all their COPD patients, whereas our US$1B estimate is based on a much smaller <5% penetration within the subpopulation of patients on triple therapies," Tsai noted.

Verona Pharma plans to disclose ensifentrine's price on the same day of the drug's approval, with WAC bookends ranging from US$1,400 (nebulizer Yupelri) to US$3,800 (injectable Dupixent) per month. Tsai believes that the Street assumes US$1,400/month, leaving room for pricing upside.

With a Buy rating and a price target of US$38.00, representing a potential upside of 155% from the price at the time of the report of US$14.88, Jefferies sees significant potential for Verona Pharma as it approaches the FDA approval of ensifentrine and prepares for a strong commercial launch in the second half of 2024 and 2025.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Verona Pharma Plc.
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Disclosures of Jefferies & Co., Verona Pharma Plc., May 9, 2024

Analyst Certification: I, Andrew Tsai, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. I, AJ Velasquez-Mao, Ph.D., certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. I, Matthew Barcus, Ph.D., certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgement.

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