BTIG Research analyst Dr. Thomas Shrader, in a research report published on May 9, 2024, emphasized Verona Pharma Plc.'s (VRNA:NASDAQ; VRP:LON) potential to successfully launch ensifentrine into the substantial market of nearly 9 million COPD patients, approximately half of whom remain symptomatic.
The analyst maintains a Buy rating on the company, with a price target of US$34.00, representing a significant upside from the closing price at the time of the report of US$14.88.
Shrader highlighted two key points that increase his confidence in Verona Pharma's ability to effectively launch ensifentrine. "The first is the idea that the number one issue on patient's minds is chronic breathlessness. As a result, the key aspect of disease education is to get the word out that patients have a new option to feel better," the analyst noted. "We see this message as easier to deliver than to increase awareness of the negative ramifications of exacerbations."
The second positive aspect is the COPD market itself. Based on Verona Pharma's extensive market research, the company has identified the top 3,000 COPD prescribers, who, on average, see more than 150 patients per month.
"These symptomatic patients see a doctor about three times annually, suggesting an average patient load of about 600 per physician. In other words, these top 3,000 COPD doctors cover about 2,000,000 patients — a physician target well within the scope of Verona's 100-rep sales force," Shrader explained.
Verona Pharma reported its first quarter 2024 (1Q24) financial results, with total operating expenses and net loss of US$27.2 million and US$25.8 million, respectively. The company ended 1Q24 with US$254.9 million in cash and cash equivalents.
"Additionally, the company announced strategic financing agreements for up to US$650M, which include an 11% debt facility of up to US$400M and the Revenue Interest Purchase and Sale Agreement (RIPSA) of up to US$250M (repaid with a 6.5% royalty with repayment capped at 1.75x of the amount funded)," Shrader noted.
The analyst also discussed launch details, highlighting that most COPD patients are covered by Medicare (70%), and for a mature nebulized product, more than 75% of these patients are covered under the Part B channel. Shrader provided relevant data points for Yupelri, another COPD treatment, showcasing the lower rate of payor "rejection" by Medicare Part B channels compared to commercial payors and Medicare Part D channels.
Verona Pharma's management team, led by CEO David Zaccardelli, has been focused on preparing for the successful launch of ensifentrine, leveraging the company's strong financial position and strategic partnerships to support the commercialization of the drug.
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Disclosures for BTIG Research, Verona Pharma Plc., May 9, 2024
Analyst Certification I, Thomas Shrader, hereby certify that the views about the companies and securities discussed in this report are accurately expressed and that I have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report. I, Sung Jun Hong, hereby certify that the views about the companies and securities discussed in this report are accurately expressed and that I have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report.
Regulatory Disclosures Ratings Definitions BTIG LLC’s (“BTIG”) ratings, effective June 12, 2017, are defined as follows: BUY – A security which is expected to produce a positive total return of 15% or greater over the 12 months following the recommendation. The BUY rating may be maintained as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return.
Company Valuation and Risk Disclosures Verona Pharma plc (VRNA, Buy, $34 PT) Valuation: We value Verona Pharma using a discounted cash flow analysis that assumes a 13.5% discount rate and 0.5% terminal growth rate. Risks: Verona is an established drug development company. It faces all the standard risks for that industry including uncertainty surrounding clinical readouts and regulatory decisions, and increasingly complex and price-sensitive commercial markets for its products.
Company–Specific Regulatory Disclosures BTIG LLC expects to receive or intends to seek compensation for investment banking services in the next 3 months from: Verona Pharma plc (VRNA)
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