Verona Pharma (VRNA) 10-Q 5 Aug 21 2021 Q2 Quarterly report Financial data

Cover

Cover - shares	6 Months Ended
	Jun. 30, 2021	Aug. 04, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	001-38067
Entity Registrant Name	Verona Pharma plc
Entity Incorporation, State or Country Code	X0
Entity Tax Identification Number	98-1489389
Entity Address, Address Line One	3 More London Riverside
Entity Address, City or Town	London
Entity Address, Postal Zip Code	SE1 2RE
Entity Address, Country	GB
Country Region	44
City Area Code	203
Local Phone Number	283 4200
Title of 12(b) Security	Ordinary shares, nominal value £0.05 per share*
Trading Symbol	VRNA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		480,291,822
Amendment Flag	false
Document Fiscal Year Focus	2021
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001657312

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 146,035	$ 187,986
Accounts receivable	25,002	0
Prepaid expenses	9,817	4,538
Tax and tax incentive receivables	14,108	8,260
Contract asset	4,001	0
Equity interest receivable	15,000	0
Other current assets	2,320	1,720
Total current assets	216,283	202,504
Non-current assets:
Furniture and equipment, net	89	107
Goodwill	545	545
Right-of-use assets	1,585	1,050
Total non-current assets	2,219	1,702
Total assets	218,502	204,206
Current liabilities:
Accounts payable	34	178
Accrued expenses	17,188	10,863
Deferred revenue	40,051	0
Operating lease liability	749	798
Warrants	42	2,246
Other current liabilities	300	118
Total current liabilities	58,364	14,203
Non-current liabilities:
Term loan	4,767	4,635
Operating lease liability	974	514
Total non-current liabilities	5,741	5,149
Total liabilities	64,105	19,352
Commitments and contingencies
Shareholders' equity:
Ordinary £0.05 par value shares; 488,739,150 and 488,304,446 issued, and 471,839,302 and 463,304,446 outstanding, at June 30, 2021 and December 31, 2020, respectively	31,824	31,794
Additional paid-in capital	379,282	366,411
Ordinary shares held in treasury	(843)	(1,700)
Accumulated other comprehensive loss	(4,601)	(4,601)
Accumulated deficit	(251,265)	(207,050)
Total shareholders' equity	154,397	184,854
Total liabilities and shareholders' equity	$ 218,502	$ 204,206

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - £ / shares	Jun. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Common stock, par value (in pounds sterling per share)	£ 0.05	£ 0.05
Common stock, issued (in shares)	488,739,150	488,304,446
Common stock, outstanding (in shares)	471,839,302	463,304,446

Consolidated Statements of Oper

Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Operating expenses
Research and development	$ 20,563	$ 7,811	$ 34,137	$ 15,433
General and administrative	7,985	3,172	17,267	10,034
Total operating expenses	28,548	10,983	51,404	25,467
Operating loss	(28,548)	(10,983)	(51,404)	(25,467)
Other income / (expense)
Benefit from research and development tax credit	3,836	1,786	5,906	3,471
Interest income	3	34	7	103
Interest expense	(85)	0	(169)	0
Fair value movement on warrants	2,711	89	2,204	231
Foreign exchange gain	40	51	203	344
Total other income, net	6,505	1,960	8,151	4,149
Loss before income taxes	(22,043)	(9,023)	(43,253)	(21,318)
Income tax expense	(25)	(15)	(105)	(66)
Net loss	(22,068)	(9,038)	(43,358)	(21,384)
Other comprehensive loss:
Foreign currency translation adjustments	0	(164)	0	(2,321)
Total comprehensive loss attributable to shareholders of the Company	$ (22,068)	$ (9,202)	$ (43,358)	$ (23,705)
Loss per share, basic (in dollars per share)	$ (0.05)	$ (0.08)	$ (0.09)	$ (0.20)
Loss per share, diluted (in dollars per share)	$ (0.05)	$ (0.08)	$ (0.09)	$ (0.20)
Weighted-average shares outstanding, diluted (in shares)	470,786,767	106,360,580	469,036,978	105,908,648
Weighted-average shares outstanding, basic (in shares)	470,786,767	106,360,580	469,036,978	105,908,648

Consolidated Statements of Shar

Consolidated Statements of Shareholders’ Equity - USD ($) $ in Thousands	Total	Ordinary shares	Additional paid-in capital	Ordinary shares held in treasury	Accumulated other comprehensive loss	Accumulated deficit
Beginning balance (in shares) at Dec. 31, 2019		105,326,638
Beginning balance at Dec. 31, 2019	$ 42,741	$ 7,265	$ 179,535		$ (2,280)	$ (141,779)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(12,346)					(12,346)
Retranslation of foreign operations	(2,157)				(2,157)
Share options exercised during the period (in shares)		887,080
Share options exercised during the period	52	$ 52
Share-based compensation	1,867		1,867
Ending balance (in shares) at Mar. 31, 2020		106,213,718
Ending balance at Mar. 31, 2020	30,157	$ 7,317	181,402		(4,437)	(154,125)
Beginning balance (in shares) at Dec. 31, 2019		105,326,638
Beginning balance at Dec. 31, 2019	42,741	$ 7,265	179,535		(2,280)	(141,779)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(21,384)
Retranslation of foreign operations	(2,321)
Ending balance (in shares) at Jun. 30, 2020		106,481,006
Ending balance at Jun. 30, 2020	21,853	$ 7,333	182,352		(4,601)	(163,231)
Beginning balance (in shares) at Mar. 31, 2020		106,213,718
Beginning balance at Mar. 31, 2020	30,157	$ 7,317	181,402		(4,437)	(154,125)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(9,038)					(9,038)
Retranslation of foreign operations	(164)				(164)
Share options exercised during the period (in shares)		267,288
Share options exercised during the period	(52)	$ 16				(68)
Share-based compensation	950		950
Ending balance (in shares) at Jun. 30, 2020		106,481,006
Ending balance at Jun. 30, 2020	$ 21,853	$ 7,333	182,352		(4,601)	(163,231)
Beginning balance (in shares) at Dec. 31, 2020	463,304,446	488,304,446
Beginning balance at Dec. 31, 2020	$ 184,854	$ 31,794	366,411	$ (1,700)	(4,601)	(207,050)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(21,290)					(21,290)
Restricted share units vested	0			30		(30)
Share-based compensation	8,850		8,850
Ending balance (in shares) at Mar. 31, 2021		488,304,446
Ending balance at Mar. 31, 2021	$ 172,414	$ 31,794	375,261	(1,670)	(4,601)	(228,370)
Beginning balance (in shares) at Dec. 31, 2020	463,304,446	488,304,446
Beginning balance at Dec. 31, 2020	$ 184,854	$ 31,794	366,411	(1,700)	(4,601)	(207,050)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(43,358)
Retranslation of foreign operations	$ 0
Ending balance (in shares) at Jun. 30, 2021	471,839,302	488,739,150
Ending balance at Jun. 30, 2021	$ 154,397	$ 31,824	379,282	(843)	(4,601)	(251,265)
Beginning balance (in shares) at Mar. 31, 2021		488,304,446
Beginning balance at Mar. 31, 2021	172,414	$ 31,794	375,261	(1,670)	(4,601)	(228,370)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(22,068)					(22,068)
Common shares withheld for taxes on vested stock awards	(3,782)	$ (3,782)
Retranslation of foreign operations	0
Restricted share units vested	0			827		(827)
Share-based compensation	7,450		7,450
Stock issued during period (in shares)		434,704
Stock issued during period	$ 383	$ 30	353
Ending balance (in shares) at Jun. 30, 2021	471,839,302	488,739,150
Ending balance at Jun. 30, 2021	$ 154,397	$ 31,824	$ 379,282	$ (843)	$ (4,601)	$ (251,265)

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Operating activities:
Net loss	$ (43,358)	$ (21,384)
Adjustments to reconcile net income to net cash used in operating activities:
Foreign exchange gain	(186)	(214)
Amortization of debt issue costs	70	0
Accretion of redemption premium on debt	63	0
Fair value movement on warrants	(2,204)	(231)
Impairment of right-of-use asset	0	289
Share-based compensation	16,300	2,817
Depreciation and amortization	305	315
Changes in operating assets and liabilities:
Accounts receivable	(25,002)	0
Equity interest receivable	(15,000)	0
Prepaid expenses	(5,279)	(2,873)
Tax and tax incentive receivables	(5,848)	5,894
Other current assets	(600)	713
Non-current assets	(4,823)	(716)
Accounts payable	(144)	(953)
Accrued expenses	6,325	(561)
Lease liabilities	393	406
Deferred revenue	40,051	0
Other liabilities	182	213
Net cash used in operating activities	(38,756)	(16,285)
Cash flows from investing activities:
Purchases of furniture and equipment	0	(5)
Sale of short-term investments	0	9,792
Net cash provided by investing activities	0	9,787
Cash flows from financing activities:
Payments of withholding taxes from share-based awards	(3,782)	0
Proceeds from at-the-market sales agreement	383	0
Net cash used in financing activities	(3,399)	0
Effect of exchange rate changes on cash and cash equivalents	204	(1,570)
Net decrease in cash and cash equivalents	(41,951)	(8,068)
Cash and cash equivalents at beginning of the period	187,986	30,428
Cash and cash equivalents at end of the period	146,035	22,360
Supplemental Cash Flow Information [Abstract]
Income taxes paid	0	0
Interest paid	$ 109	$ 0

Organization and description of

Organization and description of business operations	6 Months Ended
	Jun. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization And Business Description	Organization and description of business operations Verona Pharma plc (the “Company”) is incorporated and domiciled in the United Kingdom. Verona Pharma plc has one wholly-owned subsidiary, Verona Pharma, Inc., a Delaware corporation. Rhinopharma Limited, a Canadian company that was previously a wholly owned subsidiary, was dissolved in June 2021. The address of the registered office is 1 Central Square, Cardiff, CF10 1FS, United Kingdom. The Company is a clinical-stage biopharmaceutical group focused on developing and commercializing innovative therapeutics for the treatment of respiratory diseases with significant unmet medical needs. The Company’s American Depositary Shares (“ADSs”) are listed on Nasdaq and trade under the symbol “VRNA”. Liquidity The Company has incurred recurring losses and negative cash flows from operations since inception, and has an accumulated deficit of $251.3 million as of June 30, 2021. The Company expects to incur additional losses and negative cash flows from operations until its products potentially gain regulatory approval and reach commercial profitability, if at all. The Company expects that its cash and cash equivalents as of June 30, 2021, will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the date of issuance. In March, 2021, the Company entered into an open market sale agreement with respect to an at-the-market offering program (the “ATM Program”) under which the Company may issue and sell its ordinary shares in the form of ADSs, with an aggregate offering price of up to $100.0 million. During the three months ended June 30, 2021, the Company sold 434,704 shares (equivalent to 54,338 ADSs) under the ATM Program, at an average price of approximately $0.90 per share (equivalent to $7.23 per ADS), raising aggregate net proceeds of approximately $0.4 million after deducting issuance costs. As of June 30, 2021, there remained $99.6 million of ordinary shares, in the form of ADSs, available for sale under the ATM Program.

Basis of Presentation and Summa

Basis of Presentation and Summary of Significant Accounting policies	6 Months Ended
	Jun. 30, 2021
Accounting Policies [Abstract]
Basis of Presentation and Summary of Significant Accounting policies	Basis of presentation and summary of significant accounting policies Basis of presentation and consolidation The unaudited condensed consolidated financial statements include the accounts of Verona Pharma plc and its wholly-owned subsidiary Verona Pharma, Inc. All inter-company balances and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”). The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2021 (the “2020 Form 10-K”). The balance sheet as of December 31, 2020 was derived from audited consolidated financial statements included in the 2020 Form 10-K but does not include all disclosures required by U.S. GAAP for complete financial statements. The Company’s significant accounting policies are described in Note 2 to those consolidated financial statements. In addition, the Company’s policy on revenue recognition is set out below. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. The unaudited condensed consolidated financial statements reflect all adjustments which in the opinion of management are necessary for a fair statement of results of operations, comprehensive income, financial condition, cash flows and stockholders' equity for the periods presented. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. Revenue recognition The Company’s deferred revenue arises from the Company’s agreement for the development and commercialization of ensifentrine in Greater China. The terms of the agreement include non-refundable upfront fees, payments based upon achievement of developmental and regulatory milestones, commercial milestones, royalties payable on sales, and manufacturing and supply. These payments are viewed as both fixed and variable consideration. Non-refundable upfront fees are considered fixed, while milestone payments and revenue from the commercialized product are identified as variable consideration . The Company follows the five-step model in ASC 606 “Revenue from Contracts with Customers”: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. All of the Company’s revenue is derived from contracts with customers. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. The Company’s performance obligations include intellectual property rights, (which include the license, patents and developmental and regulatory data) and manufacturing and supply. Management are required to judge when performance obligations are satisfied and consequently when revenue is recognized. If the right to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the right when the right is transferred to the customer, and the customer can use and benefit from the right. If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied. Contract assets and liabilities The Company recognizes incremental costs of obtaining a contract such as commission costs as an asset and amortizes the asset on a basis that is consistent with the satisfaction of the performance obligations to which the asset relates . Consideration receivable that is in excess of the value of satisfied, or part satisfied, performance obligations is recognized as a deferred revenue liability. Trade receivable Accounts receivable relate to amounts billed to customers. Management determine the likelihood of uncollectible accounts and provide for this accordingly. Equity receivable As of June 30, 2021, as part of the Nuance Agreement, the Company recorded a $15 million equity receivable, relating to an equity interest in Nuance Biotech, the parent company of Nuance Pharma (see note 8). This equity interest was recorded as a receivable at fair value on the date of the transaction and is classified as equity interest receivable in current assets. There are no observable market data to determine the fair value of this stock. Consequently, the receivable relating to the stock is classified under Level 3 of the fair value hierarchy. Management valued the stock on the date of the transaction using data from Nuance Pharma’s latest funding round in November 2020 and there was no change or any new information for Nuance Biotech that would have impacted this valuation as of June 30, 2021. Segment reporting The Company has one operating and reportable segment, pharmaceutical development. Use of estimates The preparation of interim unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, the accrual and prepayment of research and development expenses, estimation of contract consideration and revenue recognition, the fair value of share-based compensation and the fair value of warrants. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates. Critically, management are required to identify the promises in the contract, determine whether these promises are distinct and determine when the Company has satisfied these obligations. The Company’s consideration of these issues is discussed in Note 8. Recently adopted accounting standards and recent accounting standards not yet adopted There are no recently adopted accounting standards and recent accounting standards not yet adopted that the Company believes will have a material impact on the Company’s consolidated financial statements.

Prepaid expenses

Prepaid expenses	6 Months Ended
	Jun. 30, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid expenses	Prepaid expenses Prepaid expenses consisted of the following (in thousands): June 30, December 31, 2021 2020 Clinical trial and other development costs $ 5,643 $ 2,551 Insurance 3,864 1,701 Other 310 286 Total prepaid expenses $ 9,817 $ 4,538

Tax and tax incentive receivabl

Tax and tax incentive receivable	6 Months Ended
	Jun. 30, 2021
Receivables [Abstract]
Tax and tax incentive receivable	Tax and tax incentive receivables Tax and tax incentive receivables consisted of the following (in thousands): June 30, December 31, 2021 2020 Research and development tax credit receivable - U.K. $ 14,108 $ 8,202 Tax receivable - U.S. — 58 Total tax receivable $ 14,108 $ 8,260

Accrued expenses

Accrued expenses	6 Months Ended
	Jun. 30, 2021
Payables and Accruals [Abstract]
Accrued expenses	Accrued expenses Accrued expenses consisted of the following (in thousands): June 30, December 31, 2021 2020 Clinical trial and other development costs $ 11,227 $ 8,607 Professional fees and general corporate costs 4,925 2,149 People related costs 1,036 107 Total accrued expenses $ 17,188 $ 10,863

Warrants

Warrants	6 Months Ended
	Jun. 30, 2021
Other Liabilities Disclosure [Abstract]
Warrants	Warrants In the periods ended June 30, 2021, and December 31, 2020, no warrants were exercised or forfeited. The warrants had no intrinsic value as of June 30, 2021. There have been no changes in valuation techniques or transfers between fair value measurement levels during the period ended June 30, 2021. They are measured at fair value and included at level 3 in the fair value hierarchy. The warrants are valued using the Black-Scholes model and the table below presents the assumptions used: June 30, December 31, 2021 2020 Shares potentially issued under warrants 12,401,262 12,401,262 Exercise price in pounds sterling £ 1.7238 £ 1.7238 Risk-free interest rate 0.10 % — % Expected term to exercise 0.84 1.33 Annualized volatility 53.6 % 105.4 % Dividend rate — % — % Calculated value of the warrants, in thousands of U.S. dollars $ 42 $ 2,246 For the amount recognized at June 30, 2021, the effect when the following parameter deviates up or down is presented in the below table (in thousands): 10% volatility increase $ 125 Base case, reported fair value 42 10% volatility decrease $ 8

Term loan

Term loan	6 Months Ended
	Jun. 30, 2021
Debt Disclosure [Abstract]
Term loan	Term loan In November 2020, the Company entered into a term loan facility of up to $30.0 million (the “Term Loan”), consisting of advances of $5.0 million funded at closing and $10.0 million and $15.0 million contingent upon achievement of certain clinical development milestones and other specified conditions. As of June 30, 2021, the Company had $5.0 million principal outstanding under the Term Loan. As of June 30, 2021, the carrying value of the Term Loan was approximately $4.8 million, of which all was due in more than 12 months. The debt balance has been categorized within Level 3 of the fair value hierarchy. The carrying amount of the debt approximates its fair value based on prevailing interest rates as of the balance sheet date.

Share based compensation

Share based compensation	6 Months Ended
	Jun. 30, 2021
Share-based Payment Arrangement [Abstract]
Share based compensation	Share-based compensation The following table shows the allocation of share-based compensation between research and development and general and administrative costs (in thousands): Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Research and development $ 3,234 $ 498 $ 6,666 $ 991 General and administrative 4,217 452 9,634 1,826 Total $ 7,451 $ 950 $ 16,300 $ 2,817 Share options The following table shows share option activity in the period: 2021 Number of share options outstanding Weighted average exercise price Outstanding at January 1 13,125,672 $ 1.41 Forfeited (996,720) 1.17 Outstanding at March 31 12,128,952 $ 1.43 Granted 800,000 0.73 Outstanding at June 30 12,928,952 $ 1.38 Restricted stock units activity The following table shows restricted stock unit (“RSU”) activity in the period: 2021 Number of RSUs outstanding Weighted average remaining contractual term (years) Outstanding at January 1 61,992,360 1.5 Granted 750,928 Vested (441,304) Outstanding at March 31 62,301,984 1.3 Vested (11,920,928) Outstanding at June 30 50,381,056 1.3

Net loss per share

Net loss per share	6 Months Ended
	Jun. 30, 2021
Earnings Per Share [Abstract]
Net loss per share	Net loss per share Net loss per share is calculated on an ordinary share basis. The Company’s ADSs that are listed on the Nasdaq Global Market each represent eight ordinary shares. The following table shows the computation of basic and diluted earnings per share for the periods ended June 30, 2021 and 2020 (net loss in thousands, loss per share in dollars): Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Numerator: Net loss $ (22,068) $ (9,038) $ (43,358) $ (21,384) Net loss available to ordinary shareholders - basic and diluted $ (22,068) $ (9,038) $ (43,358) $ (21,384) Denominator: Weighted-average shares outstanding - basic and diluted 470,786,767 106,360,580 469,036,978 105,908,648 Net loss per share - basic and diluted $ (0.05) $ (0.08) $ (0.09) $ (0.20) During the periods ended June 30, 2021 and 2020, outstanding share options, RSUs and warrants over 75,713,291 and 34,504,825 ordinary shares, respectively, were not included in the computation of diluted earnings per ordinary share, because to do so would be antidilutive.

Significant agreements

Significant agreements	6 Months Ended
	Jun. 30, 2021
Revenue from Contract with Customer [Abstract]
Significant agreements	Significant agreements Ligand agreement In 2006 the Company acquired Rhinopharma and assumed contingent liabilities owed to Ligand UK Development Limited (“Ligand”) (formerly Vernalis Development Limited). The Company refers to the assignment and license agreement as the Ligand Agreement. Ligand assigned to the Company all of its rights to certain patents and patent applications relating to ensifentrine and related compounds (the “Ligand Patents”) and an exclusive, worldwide, royalty-bearing license under certain Ligand know-how to develop, manufacture and commercialize products (the ”Ligand Licensed Products”) developed using Ligand Patents, Ligand know-how and the physical stock of certain compounds. The contingent liability comprises a milestone payment on obtaining the first approval of any regulatory authority for the commercialization of a Ligand Licensed Product, low single digit royalties based on the future sales performance of all Ligand Licensed Products and a portion equal to a mid-twenty percent of any consideration received from any sub-licensees for the Ligand Patents and for Ligand know-how. At the time of the acquisition the contingent liability was not recognized as part of the acquisition accounting as it was immaterial. The Company will therefore record as a research and development expense the milestone payment or royalties when they are probable. Nuance agreement The Company entered into a collaboration and license agreement with Nuance Pharma Limited (“Nuance Pharma”) effective June 9, 2021 (the “Effective Date”) (the “Nuance Agreement”) under which the Company granted Nuance Pharma the exclusive rights to develop and commercialize ensifentrine in Greater China (China, Taiwan, Hong Kong and Macau). In return, the Company received an unconditional right to consideration aggregating $40.0 million consisting of $25.0 million and an equity interest, valued at $15.0 million as of the Effective Date, in Nuance Biotech, the parent company of Nuance Pharma. The Company is eligible to receive future milestone payments of up to $179.0 million triggered upon achievement of certain clinical, regulatory, and commercial milestones, as well as tiered double-digit royalties as a percentage of net sales of the products in Greater China. As of June 30, 2021, as the $25.0 million cash payment and $15.0 million equity interest were due on signing the contract, they were recorded as receivables on the Company’s balance sheet. The $25.0 million cash payment was received in July 2021. Under the terms of the Nuance Agreement, at any time until three months prior to the expected submission of the first New Drug Application in Greater China, if (i) a third party is interested in partnering with the Company, either globally or in territory covering at least the United States or Europe, for the development and/or commercialization of ensifentrine or (ii) the Company undergoes a change of control, the Company will have an exclusive option right to buy back the license granted to Nuance Pharma and all related assets. The price is agreed to be equal to the aggregate of (i) all prior amounts paid by Nuance Pharma to the Company in cash under the agreement and (ii) all development and regulatory costs incurred and paid by Nuance Pharma in connection with the development and commercialization of the ensifentrine under the Nuance Agreement multiplied by a single-digit factor range dependent upon achievement of certain milestones, subject to a specified maximum amount. The Nuance Agreement will continue on a jurisdiction-by-jurisdiction and product-by-product basis until the expiration of royalty payment obligations with respect to such product in such jurisdiction unless earlier terminated by the parties. Either party may terminate the Nuance Agreement for an uncured material breach or bankruptcy of the other party. Nuance Pharma may also terminate the Nuance Agreement at will upon 90 days' prior written notice. The Company reviewed the buy-back option and determined that because it is conditional on a third party the Company does not have the practical ability to exercise it and, accordingly, the contract is accounted for under ASC 606. The transaction price at the Effective Date of the agreement was $40.0 million consisting of the $25.0 million upfront cash payment and $15.0 million equity interest. Developmental and regulatory milestones, and the manufacture and supply of ensifentrine drug product, were not included in the transaction price as management determined that it is not probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Commercial milestones and sales royalties were also excluded and will be recognized when the sales occur in Greater China. The performance obligations in the Nuance Agreement include the grant of the license (including the right to commercialize ensifentrine until the end of the term, the sharing of certain know how, and the sharing of certain clinical and regulatory data), and manufacture and supply of ensifentrine drug product. The Company has determined that the license and the know how shared with Nuance Pharma constitutes functional intellectual property and that revenue relating to this should be recognized at a point in time. Consequently, the Company has determined that it will have fulfilled its obligations to Nuance Pharma when it has delivered the know how that will allow Nuance Pharma to file an investigational new drug application in Greater China. This know how is expected to be delivered in the three months ended September 30, 2021, and the $40.0 million revenue is expected to be recognized in that period. Revenue relating to the manufacture and supply obligations will be recognized when the drug product is delivered. The Company has reviewed the two performance obligations in the Nuance Agreement and has determined that these are priced at fair value. The equity interest in Nuance Biotech was recorded as a receivable at fair value on the Effective Date and is classified as equity interest receivable in current assets. There are no observable market data to determine the fair value of this equity interest. Consequently, the receivable relating to the equity interest is classified under Level 3 of the fair value hierarchy. Management valued the equity interest using data from Nuance Pharma’s latest funding round in November 2020. As of June 30, 2021, the Company had no information to indicate that this valuation is not still appropriate. On the Effective Date, the $40.0 million fixed consideration was recognized and recorded in deferred revenue. As of June 30, 2021, $nil had been recognized in the Statement of Operations and Comprehensive Loss. As of June 30, 2021, $25.0 million cash receivable and $15.0 million equity interest were recorded in current assets. On the Effective Date, $4.0 million of costs of obtaining a contract were recorded as a contract asset. As of June 30, 2021, $nil had been amortized into the Statement of Operations and Comprehensive Loss and it will be recognized in line with the revenue from the grant of the license.

Basis of Presentation and Sum_2

Basis of Presentation and Summary of Significant Accounting policies (Policies)	6 Months Ended
	Jun. 30, 2021
Accounting Policies [Abstract]
Basis of presentation and consolidation	Basis of presentation and consolidation The unaudited condensed consolidated financial statements include the accounts of Verona Pharma plc and its wholly-owned subsidiary Verona Pharma, Inc. All inter-company balances and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”). The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2021 (the “2020 Form 10-K”). The balance sheet as of December 31, 2020 was derived from audited consolidated financial statements included in the 2020 Form 10-K but does not include all disclosures required by U.S. GAAP for complete financial statements. The Company’s significant accounting policies are described in Note 2 to those consolidated financial statements. In addition, the Company’s policy on revenue recognition is set out below. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. The unaudited condensed consolidated financial statements reflect all adjustments which in the opinion of management are necessary for a fair statement of results of operations, comprehensive income, financial condition, cash flows and stockholders' equity for the periods presented. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. Revenue recognition The Company’s deferred revenue arises from the Company’s agreement for the development and commercialization of ensifentrine in Greater China. The terms of the agreement include non-refundable upfront fees, payments based upon achievement of developmental and regulatory milestones, commercial milestones, royalties payable on sales, and manufacturing and supply. These payments are viewed as both fixed and variable consideration. Non-refundable upfront fees are considered fixed, while milestone payments and revenue from the commercialized product are identified as variable consideration . The Company follows the five-step model in ASC 606 “Revenue from Contracts with Customers”: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. All of the Company’s revenue is derived from contracts with customers. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. The Company’s performance obligations include intellectual property rights, (which include the license, patents and developmental and regulatory data) and manufacturing and supply. Management are required to judge when performance obligations are satisfied and consequently when revenue is recognized. If the right to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the right when the right is transferred to the customer, and the customer can use and benefit from the right. If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied. Contract assets and liabilities The Company recognizes incremental costs of obtaining a contract such as commission costs as an asset and amortizes the asset on a basis that is consistent with the satisfaction of the performance obligations to which the asset relates . Consideration receivable that is in excess of the value of satisfied, or part satisfied, performance obligations is recognized as a deferred revenue liability. Trade receivable Accounts receivable relate to amounts billed to customers. Management determine the likelihood of uncollectible accounts and provide for this accordingly. Equity receivable As of June 30, 2021, as part of the Nuance Agreement, the Company recorded a $15 million equity receivable, relating to an equity interest in Nuance Biotech, the parent company of Nuance Pharma (see note 8). This equity interest was recorded as a receivable at fair value on the date of the transaction and is classified as equity interest receivable in current assets. There are no observable market data to determine the fair value of this stock. Consequently, the receivable relating to the stock is classified under Level 3 of the fair value hierarchy. Management valued the stock on the date of the transaction using data from Nuance Pharma’s latest funding round in November 2020 and there was no change or any new information for Nuance Biotech that would have impacted this valuation as of June 30, 2021.
Segment Reporting	Segment reporting The Company has one operating and reportable segment, pharmaceutical development.
Use of estimates	Use of estimates The preparation of interim unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, the accrual and prepayment of research and development expenses, estimation of contract consideration and revenue recognition, the fair value of share-based compensation and the fair value of warrants. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates. Critically, management are required to identify the promises in the contract, determine whether these promises are distinct and determine when the Company has satisfied these obligations. The Company’s consideration of these issues is discussed in Note 8.
Recently adopted accounting standards and recent accounting standards not yet adopted	Recently adopted accounting standards and recent accounting standards not yet adopted There are no recently adopted accounting standards and recent accounting standards not yet adopted that the Company believes will have a material impact on the Company’s consolidated financial statements.

Prepaid expenses (Tables)

Prepaid expenses (Tables)	6 Months Ended
	Jun. 30, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Summary of Prepaid Expenses	Prepaid expenses consisted of the following (in thousands): June 30, December 31, 2021 2020 Clinical trial and other development costs $ 5,643 $ 2,551 Insurance 3,864 1,701 Other 310 286 Total prepaid expenses $ 9,817 $ 4,538

Tax and tax incentive receiva_2

Tax and tax incentive receivable (Tables)	6 Months Ended
	Jun. 30, 2021
Receivables [Abstract]
Components of Taxes Receivable	Tax and tax incentive receivables consisted of the following (in thousands): June 30, December 31, 2021 2020 Research and development tax credit receivable - U.K. $ 14,108 $ 8,202 Tax receivable - U.S. — 58 Total tax receivable $ 14,108 $ 8,260

Accrued expenses (Tables)

Accrued expenses (Tables)	6 Months Ended
	Jun. 30, 2021
Payables and Accruals [Abstract]
Schedule of Accrued Expenses	Accrued expenses consisted of the following (in thousands): June 30, December 31, 2021 2020 Clinical trial and other development costs $ 11,227 $ 8,607 Professional fees and general corporate costs 4,925 2,149 People related costs 1,036 107 Total accrued expenses $ 17,188 $ 10,863

Warrants (Tables)

Warrants (Tables)	6 Months Ended
	Jun. 30, 2021
Other Liabilities Disclosure [Abstract]
Fair Value Valuation Assumptions of Warrants	The warrants are valued using the Black-Scholes model and the table below presents the assumptions used: June 30, December 31, 2021 2020 Shares potentially issued under warrants 12,401,262 12,401,262 Exercise price in pounds sterling £ 1.7238 £ 1.7238 Risk-free interest rate 0.10 % — % Expected term to exercise 0.84 1.33 Annualized volatility 53.6 % 105.4 % Dividend rate — % — % Calculated value of the warrants, in thousands of U.S. dollars $ 42 $ 2,246
Fair Value Impact Of Increase Or Decrease in Volatility	For the amount recognized at June 30, 2021, the effect when the following parameter deviates up or down is presented in the below table (in thousands): 10% volatility increase $ 125 Base case, reported fair value 42 10% volatility decrease $ 8

Share based compensation (Table

Share based compensation (Tables)	6 Months Ended
	Jun. 30, 2021
Share-based Payment Arrangement [Abstract]
Allocation of Share Based Compensation Expense	The following table shows the allocation of share-based compensation between research and development and general and administrative costs (in thousands): Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Research and development $ 3,234 $ 498 $ 6,666 $ 991 General and administrative 4,217 452 9,634 1,826 Total $ 7,451 $ 950 $ 16,300 $ 2,817
Share Option Activity	The following table shows share option activity in the period: 2021 Number of share options outstanding Weighted average exercise price Outstanding at January 1 13,125,672 $ 1.41 Forfeited (996,720) 1.17 Outstanding at March 31 12,128,952 $ 1.43 Granted 800,000 0.73 Outstanding at June 30 12,928,952 $ 1.38
Restricted Stock Unit Activity	The following table shows restricted stock unit (“RSU”) activity in the period: 2021 Number of RSUs outstanding Weighted average remaining contractual term (years) Outstanding at January 1 61,992,360 1.5 Granted 750,928 Vested (441,304) Outstanding at March 31 62,301,984 1.3 Vested (11,920,928) Outstanding at June 30 50,381,056 1.3

Net loss per share (Tables)

Net loss per share (Tables)	6 Months Ended
	Jun. 30, 2021
Earnings Per Share [Abstract]
Computation of Basic and Diluted Earning Per Share	The following table shows the computation of basic and diluted earnings per share for the periods ended June 30, 2021 and 2020 (net loss in thousands, loss per share in dollars): Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Numerator: Net loss $ (22,068) $ (9,038) $ (43,358) $ (21,384) Net loss available to ordinary shareholders - basic and diluted $ (22,068) $ (9,038) $ (43,358) $ (21,384) Denominator: Weighted-average shares outstanding - basic and diluted 470,786,767 106,360,580 469,036,978 105,908,648 Net loss per share - basic and diluted $ (0.05) $ (0.08) $ (0.09) $ (0.20)

Organization, Consolidation and

Organization, Consolidation and Presentation of Financial Statements (Details) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2021USD ($)$ / sharesshares	Jun. 30, 2021USD ($)subsidiary$ / shares	Mar. 19, 2021USD ($)	Dec. 31, 2020USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of wholly owned subsidiaries | subsidiary		1
Class of Stock [Line Items]
Accumulated deficit	$ 251,265	$ 251,265		$ 207,050
Number of shares issued in sale | shares	434,704
Price per share (in dollars per share) | $ / shares	$ 0.90	$ 0.90
Consideration received from sale of stock	$ 400
American Depository Shares
Class of Stock [Line Items]
Maximum aggregate offering price			$ 100,000
Number of shares issued in sale | shares	54,338
Price per share (in dollars per share) | $ / shares	$ 7.23	$ 7.23
Shares available for sale	$ 99,600	$ 99,600

Basis of Presentation and Sum_3

Basis of Presentation and Summary of Significant Accounting policies (Details)	6 Months Ended
	Jun. 30, 2021subsidiary
Accounting Policies [Abstract]
Number of operating segments	1
Number of reportable segments	1

Prepaid expenses (Details)

Prepaid expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Clinical trial and other development costs	$ 5,643	$ 2,551
Insurance	3,864	1,701
Other	310	286
Total prepaid expenses	$ 9,817	$ 4,538

Tax and tax incentive receiva_3

Tax and tax incentive receivable (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Receivables [Abstract]
Research and development tax credit receivable - U.K.	$ 14,108	$ 8,202
Tax receivable - U.S.	0	58
Total tax receivable	$ 14,108	$ 8,260

Accrued expenses (Details)

Accrued expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Payables and Accruals [Abstract]
Clinical trial and other development costs	$ 11,227	$ 8,607
Professional fees and general corporate costs	4,925	2,149
People related costs	1,036	107
Total accrued expenses	$ 17,188	$ 10,863

Warrants - Narrative (Details)

Warrants - Narrative (Details) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2021	Jun. 30, 2021
Other Liabilities Disclosure [Abstract]
Number of warrants exercised and forfeited	0	0
Intrinsic value		$ 0

Warrants - Fair Value Assumptio

Warrants - Fair Value Assumptions (Details) $ in Thousands	Jun. 30, 2021USD ($)shares	Jun. 30, 2021£ / shares	Dec. 31, 2020USD ($)shares	Dec. 31, 2020£ / shares
Class of Warrant or Right [Line Items]
Stock warrants (in shares) | shares	12,401,262		12,401,262
Exercise price of stock warrant (in pound sterling per share) | £ / shares		£ 1.7238		£ 1.7238
Expected term to exercise	10 months 2 days		1 year 3 months 29 days
Calculated value of the warrants, in thousands of U.S. dollars | $	$ 42		$ 2,246
Risk-free interest rate
Class of Warrant or Right [Line Items]
Measurement Input	0.0010		0
Annualized volatility
Class of Warrant or Right [Line Items]
Measurement Input	0.536		1.054
Dividend rate
Class of Warrant or Right [Line Items]
Measurement Input	0		0

Warrants - Effect of Change in

Warrants - Effect of Change in Volatility (Details) $ in Thousands	Jun. 30, 2021USD ($)
Other Liabilities Disclosure [Abstract]
10% volatility increase	$ 125
Base case, reported fair value	42
10% volatility decrease	$ 8

Term loan (Details)

Term loan (Details) - USD ($) $ in Thousands	1 Months Ended
	Nov. 30, 2020	Jun. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Carrying value of term loan		$ 4,767	$ 4,635
Secured Debt | Term Loan Facility
Debt Instrument [Line Items]
Debt instrument, face amount	$ 30,000
Funded advances	5,000
Principal outstanding		$ 5,000
Secured Debt | Term B Loan
Debt Instrument [Line Items]
Debt instrument, face amount	10,000
Secured Debt | Term C Loan
Debt Instrument [Line Items]
Debt instrument, face amount	$ 15,000

Share based compensation - Shar

Share based compensation - Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total	$ 7,451	$ 950	$ 16,300	$ 2,817
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total	3,234	498	6,666	991
General and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total	$ 4,217	$ 452	$ 9,634	$ 1,826

Share based compensation - Sh_2

Share based compensation - Share Option Activity (Details) - $ / shares	3 Months Ended
	Jun. 30, 2021	Mar. 31, 2021
Number of share options outstanding
Beginning balance outstanding	12,128,952	13,125,672
Forfeited		(996,720)
Granted	800,000
Ending balance outstanding	12,928,952	12,128,952
Weighted average exercise price
Outstanding, Beginning Balance, Weighted average exercise price (in dollars per share)	$ 1.43	$ 1.41
Forfeited, Weight average exercise price (in dollars per share)		1.17
Granted, Weight average exercise price (in dollars per share)	0.73
Outstanding, Ending Balance, Weighted average exercise price (in dollars per share)	$ 1.38	$ 1.43

Share based compensation - RSU

Share based compensation - RSU Activity (Details) - Restricted Stock Units - shares	3 Months Ended		12 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020
RSU Activity
Outstanding, beginning balance	62,301,984	61,992,360
Granted		750,928
Vested	(11,920,928)	(441,304)
Outstanding, ending balance	50,381,056	62,301,984	61,992,360
Outstanding, Weighted average remaining contractual term	1 year 3 months 18 days	1 year 3 months 18 days	1 year 6 months

Net loss per share - Computatio

Net loss per share - Computation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Numerator:
Net loss	$ (22,068)	$ (21,290)	$ (9,038)	$ (12,346)	$ (43,358)	$ (21,384)
Net loss available to ordinary shareholders - basic	(22,068)		(9,038)		$ (43,358)	(21,384)
Net loss available to ordinary shareholders - diluted	$ (22,068)		$ (9,038)			$ (21,384)
Denominator:
Weighted-average shares outstanding, basic (in shares)	470,786,767		106,360,580		469,036,978	105,908,648
Weighted-average shares outstanding, diluted (in shares)	470,786,767		106,360,580		469,036,978	105,908,648
Net loss per share, basic (in dollars per share)	$ (0.05)		$ (0.08)		$ (0.09)	$ (0.20)
Net loss per share, diluted (in dollars per share)	$ (0.05)		$ (0.08)		$ (0.09)	$ (0.20)
Antidilutive securities excluded from computation of loss per share (in shares)					75,713,291	34,504,825

Significant agreements (Details

Significant agreements (Details) - USD ($)	1 Months Ended	3 Months Ended	6 Months Ended
	Jul. 31, 2021	Jun. 30, 2021	Jun. 30, 2021	Jun. 30, 2020	Jun. 09, 2021	Dec. 31, 2020
Capitalized Contract Cost [Line Items]
Accounts receivable		$ 25,002,000	$ 25,002,000			$ 0
Equity interest receivable		15,000,000	15,000,000			$ 0
Cash received for accounts receivable			(25,002,000)	$ 0
Nuance (Shanghai) Pharma Co Ltd
Capitalized Contract Cost [Line Items]
Transaction price					$ 40,000,000
Accounts receivable		25,000,000	25,000,000		25,000,000
Equity interest receivable		15,000,000	15,000,000		15,000,000
Future eligible milestone payments					179,000,000
Deferred revenue		25,000,000	$ 25,000,000		40,000,000
Contract asset					$ 4,000,000
Amortization of contract asset		$ 0
Subsequent Event | Nuance (Shanghai) Pharma Co Ltd
Capitalized Contract Cost [Line Items]
Cash received for accounts receivable	$ 25,000,000