Verona Pharma (VRNA) 10-Q 3 May 22 2022 Q1 Quarterly report Financial data

Cover

Cover - shares	3 Months Ended
	Mar. 31, 2022	Apr. 29, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
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		482,944,390
Amendment Flag	false
Document Fiscal Year Focus	2022
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001657312

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 132,764	$ 148,380
Prepaid expenses	1,246	4,037
Tax and tax incentive receivable	16,420	15,583
Other current assets	2,525	2,063
Total current assets	152,955	170,063
Non-current assets:
Furniture and equipment, net	71	80
Goodwill	545	545
Equity interest	15,000	15,000
Right-of-use assets	744	899
Total non-current assets	16,360	16,524
Total assets	169,315	186,587
Current liabilities:
Accounts payable	8,064	10,044
Accrued expenses	28,877	22,256
Operating lease liability	583	648
Taxes payable	235	147
Other current liabilities	144	327
Total current liabilities	37,903	33,422
Non-current liabilities:
Term loan	4,928	4,874
Operating lease liability	177	286
Total non-current liabilities	5,105	5,160
Total liabilities	43,008	38,582
Commitments and contingencies
Shareholders' equity:
Ordinary £0.05 par value shares; 494,058,246 and 489,177,550 issued, and 482,944,390 and 480,082,966 outstanding, at March 31, 2022 and December 31, 2021, respectively	32,182	31,855
Additional paid-in capital	388,204	385,070
Ordinary shares held in treasury	(739)	(603)
Accumulated other comprehensive loss	(4,601)	(4,601)
Accumulated deficit	(288,739)	(263,716)
Total shareholders' equity	126,307	148,005
Total liabilities and shareholders' equity	$ 169,315	$ 186,587

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - £ / shares	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Common stock, par value (in pounds sterling per share)	£ 0.05	£ 0.05
Common stock, issued (in shares)	494,058,246	489,177,550
Common stock, outstanding (in shares)	482,944,390	480,082,966

Consolidated Statements of Oper

Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Operating expenses
Research and development	$ 17,625	$ 13,574
Selling, general and administrative	7,440	9,282
Total operating expenses	25,065	22,856
Operating loss	(25,065)	(22,856)
Other income/(expense)
Research and development tax credit	1,302	2,070
Interest income	15	4
Interest expense	(84)	(84)
Fair value movement on warrants	0	(507)
Foreign exchange (loss)/gain	(923)	163
Total other income, net	310	1,646
Loss before income taxes	(24,755)	(21,210)
Income tax expense	(82)	(80)
Net loss	$ (24,837)	$ (21,290)
Profit/(loss) per share, basic (in dollars per share)	$ (0.05)	$ (0.05)
Profit/(loss) per share, diluted (in dollars per share)	$ (0.05)	$ (0.05)

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, 2020		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				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, 2021	480,082,966	489,177,550
Beginning balance at Dec. 31, 2021	$ 148,005	$ 31,855	385,070	(603)	(4,601)	(263,716)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(24,837)					(24,837)
Issuance of common shares under at-the-market sales agreement (in shares)		80,696
Issuance of common shares under at-the-market sales agreement	67	$ 5	62
Restricted share units vested				186		(186)
Issuance of ordinary shares to treasury (in shares)		4,800,000
Issuance of ordinary shares to treasury		$ 322		(322)
Common shares withheld for taxes on vested stock awards	(793)		(793)
Equity settled share-based compensation reclassified as cash-settled	118		118
Share-based compensation	$ 3,747		3,747
Ending balance (in shares) at Mar. 31, 2022	482,944,390	494,058,246
Ending balance at Mar. 31, 2022	$ 126,307	$ 32,182	$ 388,204	$ (739)	$ (4,601)	$ (288,739)

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Operating activities:
Net loss	$ (24,837)	$ (21,290)
Adjustments to reconcile net income to net cash used in operating activities:
Foreign exchange loss/(gain)	1,119	(155)
Amortization of debt issue costs	23	19
Accretion of redemption premium on debt	31	31
Fair value movement on warrants	0	507
Share-based compensation	3,748	8,850
Depreciation and amortization	163	153
Changes in operating assets and liabilities:
Prepaid expenses	2,791	(2,709)
Tax incentive receivable	(1,578)	(2,012)
Other current assets	(462)	236
Accounts payable	(1,980)	363
Accrued expenses	6,621	(2,349)
Lease liabilities	(174)	(210)
Taxes payable	88	0
Other current liabilities	(65)	15
Net cash used in operating activities	(14,512)	(18,551)
Cash flows from investing activities:
Net cash used in investing activities	0	0
Cash flows from financing activities:
Payments of withholding taxes from share-based awards	(793)	0
Proceeds from at-the-market sales agreement	67	0
Net cash used in financing activities	(726)	0
Effect of exchange rate changes on cash and cash equivalents	(378)	163
Net change in cash and cash equivalents	(15,616)	(18,388)
Cash and cash equivalents at beginning of the period	148,380	187,986
Cash and cash equivalents at end of the period	132,764	169,598
Supplemental Cash Flow Information [Abstract]
Income taxes paid	1	0
Interest paid	$ 53	$ 55

Organization and description of

Organization and description of business operations	3 Months Ended
	Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and description of business operations	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 corporatio n. Rhinopharma Limited, a Canadian company that was previously a non-operating, 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 the Nasdaq Global Market (“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 $288.7 million as of March 31, 2022. 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 March 31, 2022, 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 March 31, 2022, the Company sold 80,696 ordinary shares (equivalent to 10,087 ADSs) under the ATM Program, at an average price of approximately $0.86 per share (equivalent to $6.86 per ADS), raising aggregate net proceeds of approximately $0.1 million after deducting issuance costs. As of March 31, 2022, there remained ordinary shares, in the form of ADSs, with a value up to $99.2 million available for sale under the ATM Program. The Company’s commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if ever. Additionally we may enter into out-licensing transactions from time to time but there can be no assurance that the company can secure such transactions in the future. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives including to further advance clinical and regulatory activities, to fund prelaunch and launch related costs and to create an effective sales and marketing organization to commercialize ensifentrine. We will need to seek additional funding through public or private financings, debt financing, collaboration or licensing agreements and other arrangements. However, there is no guarantee that we will be successful in securing additional capital on acceptable terms, or at all.

Basis of presentation and summa

Basis of presentation and summary of significant accounting policies	3 Months Ended
	Mar. 31, 2022
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 March 3, 2022 (the “2021 Form 10-K”). The Consolidated Balance Sheet as of December 31, 2021, was derived from audited consolidated financial statements included in the 2021 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. 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 shareholders' 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. 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, the fair value of share-based compensation, the fair value of warrants, research and development tax credit and the carrying value of the equity interest in Nuance Pharma (as defined below). 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. 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	3 Months Ended
	Mar. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid expenses	Prepaid expenses Prepaid expenses consisted of the following (in thousands): March 31, December 31, 2022 2021 Clinical trial and other development costs $ 452 $ 2,169 Insurance 435 1,555 Other 359 313 Total prepaid expenses $ 1,246 $ 4,037

Tax and tax incentive receivabl

Tax and tax incentive receivable	3 Months Ended
	Mar. 31, 2022
Receivables [Abstract]
Tax and tax incentive receivable	Tax and tax incentive receivables Tax and tax incentive receivables consisted of the following (in thousands): March 31, December 31, 2022 2021 Research and development tax credit receivable - U.K. $ 16,420 $ 15,583 Total tax receivable $ 16,420 $ 15,583 The Company conducts research and development activities including, but not limited to, developing ensifentrine for various indications and delivery methods, and as a result the Company benefits in the U.K. from the HM Revenue and Customs, or HMRC, small and medium sized enterprises research and development relief, or SME R&D credit, which provides relief against U.K. Corporation Tax. Effective for accounting periods starting after April 1, 2021, new rules were introduced whereby the amount of SME R&D tax credit that a business can receive in any one year will be capped at £20,000 plus three times the company’s total Pay As You Earn (“PAYE”) and National Insurance contributions (“NIC”) liability. Exemptions to the cap have been introduced which are available to companies that meet certain conditions. The Company believes it may be eligible for an exemption and has requested feedback from HMRC. If the cap does not apply the Company would have recorded $3.6 million relating to the quarter ended March 31, 2022 instead of the $1.3 million reported in the condensed consolidated statements of operations. Until we receive this feedback the Company is accounting for the credit as if the cap applied.

Accrued expenses

Accrued expenses	3 Months Ended
	Mar. 31, 2022
Payables and Accruals [Abstract]
Accrued expenses	Accrued expenses Accrued expenses consisted of the following (in thousands): March 31, December 31, 2022 2021 Clinical trial and other development costs $ 27,520 $ 21,336 Professional fees and general corporate costs 846 919 People related costs 511 1 Total accrued expenses $ 28,877 $ 22,256

Term loan

Term loan	3 Months Ended
	Mar. 31, 2022
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 March 31, 2022, the Company had $5.0 million principal outstanding under the Term Loan. The Term Loan is governed by a loan and security agreement, dated as of November 19, 2020, between the Borrowers and SVB, as amended (the “Loan Agreement”). The Term B Loan will be available, subject to and customary terms and conditions, only during the period commencing upon the achievement of a specific clinical milestone relating to ensifentrine through and including September 30, 2022. The Term C Loan will be available, subject to customary terms and conditions, only during the period commencing upon the achievement of an additional specific clinical milestone relating to ensifentrine through and including June 30, 2023. The Term Loan will mature on November 1, 2024. Each advance under the Term Loan accrues interest at a floating per annum rate equal to the greater of (a) the sum of the prime rate reported in The Wall Street Journal plus 1.00% and (b) four and one-quarter of one percent (4.25%). The Term Loan provides for interest-only payments on a monthly basis until the payment date immediately preceding December 1, 2023. Thereafter, amortization payments will be payable monthly in equal installments of principal plus monthly payments of accrued interest. Upon repayment (whether at maturity, upon acceleration or by prepayment or otherwise), the Borrowers shall make a final payment to SVB in the amount of 10% of the aggregate Term Loans advanced (the "Final Payment"). The Borrowers may prepay the Term Loan in full but not in part provided that the Borrowers (i) provide ten days’ prior written notice to SVB, (ii) pays on the date of such prepayment (A) all outstanding principal plus accrued and unpaid interest, (B) a prepayment fee of $450,000 plus 3.0% of the Term C Loans advanced if paid on or before the first anniversary of the closing date; $300,000 plus 2.00% of the Term C Loans advanced if paid after the first anniversary of the closing date and on or before the second anniversary of the closing date; and $150,000 plus 1.00% of the Term C Loans advanced if paid thereafter and prior to maturity, (C) the Final Payment and (D) all other sums, if any, that shall become due and payable with respect to the Term Loan Advances, including interest at the Default Rate with respect to any past due amounts. Amounts outstanding during an event of default are payable upon SVB's demand and shall accrue interest at an additional rate of 3.0% per annum. The Term Loan is secured by a lien on substantially all of the assets of the Borrowers, other than the equity interests of Verona U.S. and other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. The Borrowers have also granted SVB a negative pledge with respect to its intellectual property. The Loan Agreement contains customary covenants and representations, including but not limited to financial reporting obligations and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. The Loan Agreement also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rights for the benefit of SVB. The Loan Agreement includes a minimum cash covenant triggered when Borrowers' consolidated cash and cash equivalents drop below $45.0 million at any time after the earliest to occur of any of the following: (i) the release of negative data from ENHANCE-2 and/or ENHANCE-1, which in the reasonable business discretion Borrowers’ senior management, would be considered insufficient to support submission of an NDA to the FDA, (ii) the FDA issues a complete response letter with respect to an NDA submitted for ensifentrine, or (iii) failure to achieve a specific regulatory milestone relating to ensifentrine by June 30, 2023 (extendable to March 31, 2024 upon the Borrowers receiving a specified amount of new cash proceeds after September 8, 2020 from the sale of equity securities in one or more public financings or other bona fide equity financings, subordinated debt and/or upfront/milestone payments from one or more collaboration agreements not prohibited in the Loan Agreement). Upon such trigger, Borrowers must cash collateralize an amount equal to the outstanding obligations to SVB plus the amount of any prepayment penalty and Final Payment which would be due in the event the Loan Agreement were prepaid in full with respect to the Term Loans advanced as of such time. As of March 31, 2022, the carrying value of the Term Loan was approximately $4.9 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.

Equity Interest

Equity Interest	3 Months Ended
	Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Equity interest	Equity interest The Company entered into a collaboration and license agreement (the “Nuance Agreement”) with Nuance Pharma Limited (“Nuance Pharma”) effective June 9, 2021 (the “Effective Date”), 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 in cash 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 follows guidance from ASC 321-10-35-2 and uses the fair value measurement alternative and measures the securities at cost, which is deemed to be the value indicated by the last observable transaction in Nuance Biotech's stock, subject to impairment. The valuation will be adjusted for any observable price changes in orderly transactions for an identical or similar investment in Nuance Biotech, or if there is an indicator of impairment. As of March 31, 2022, there had been no observable transactions to indicate any price changes in the value of Nuance Biotech’s stock, nor had there been any indications of impairment. The equity interest is therefore recorded at a value of $15.0 million.

Significant agreements

Significant agreements	3 Months Ended
	Mar. 31, 2022
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 (the “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. In March 2022 we entered into an Amendment Agreement (the “Amendment”) with Ligand whereby the Ligand Agreement was amended to clarify certain ambiguous terms in the Ligand Agreement. Pursuant to the Amendment: • the Company agreed to pay to Ligand (i) $2.0 million within five business days of the date of the Amendment and (ii) $15.0 million upon the first commercial sale of ensifentrine by the Company or a sub-licensee, which amount is payable in cash or, at the Company's discretion, by the issuance of Company equity of equivalent value, as determined based on the volume-weighted average price of the Company's American Depositary Shares on the Nasdaq Global Market over the ten (10) trading days including and prior to such milestone event; • the Ligand Agreement shall expire on March 24, 2042 unless terminated earlier by either party in accordance with its terms; • upon termination of the Ligand Agreement, any Sub-licensee (as defined in the Amendment) shall have the right to enter into a direct license agreement with Ligand for the portion of the Program IP (as defined in the Amendment) that was sub-licensed by such Sub-licensee; • the Milestone Payment may be paid in cash or, at the Company’s discretion, by issuing to Ligand shares in the Company of equivalent value; and • each party’s right to terminate the Ligand Agreement is conditioned upon such party obtaining a final judgment of the English High Court declaring that the other party is in material breach of its obligations under the Ligand Agreement. The Company accounted for the $2.0 million payment at execution as selling, general and administrative expense in the condensed consolidated statements of operations as the payment is related to a contract modification. Nuance agreement The Company entered into a collaboration and license agreement (the “Nuance Agreement”) with Nuance Pharma Limited (“Nuance Pharma”) effective June 9, 2021 (the “Effective Date”) 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 in cash 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 March 31, 2022, the $25.0 million cash payment and $15.0 million equity interest had been received and the holding in Nuance Biotech was recorded as Equity Interest on our unaudited condensed consolidated balance sheets included elsewhere in this Quarterly Report on Form 10-Q. The Company follows guidance from ASC 321-10-35-2 and uses the fair value measurement alternative and measures the securities at cost, which is deemed to be the value indicated by the last observable transaction in Nuance Biotech's stock, subject to impairment. The valuation will be adjusted for any observable price changes in orderly transactions for an identical or similar investment in Nuance Biotech, or if there is an indicator of impairment. As of March 31, 2022, there had been no other transactions to indicate any price changes in the value of Nuance Biotech’s stock, nor had there been any indications of impairment. The Equity Interest is therefore recorded at a value of $15 million. 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 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 Nuance 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 milestones are achieved or 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 determined that it fulfilled its obligations to Nuance Pharma after it delivered the know how that will allow Nuance Pharma to file an investigational new drug application in Greater China. This know how was delivered in the year ended December 31, 2021, and the $40.0 million revenue was therefore recognized as revenue in the year ended December 31, 2021. Revenue relating to the manufacture and supply obligations will be recognized when the drug product is delivered.

Share based compensation

Share based compensation	3 Months Ended
	Mar. 31, 2022
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 selling, general and administrative costs (in thousands): Three months ended March 31, 2022 2021 Research and development $ 1,539 $ 3,432 Selling, general and administrative 2,209 5,418 Total $ 3,748 $ 8,850 Share options The following table shows share option activity, in ordinary shares, in the period: 2022 Number of share options outstanding Weighted average exercise price Outstanding at January 1 12,695,200 $ 1.38 Granted 608,000 0.62 Outstanding at March 31 13,303,200 $ 1.34 Restricted stock units activity The following table shows restricted stock unit (“RSU”) activity, in ordinary shares, in the period: 2022 Number of RSUs outstanding Weighted average remaining contractual term (years) Outstanding at January 1 38,347,352 1.2 Granted 468,224 Vested (3,943,144) Outstanding at March 31 34,872,432 1.1

Net loss per share

Net loss per share	3 Months Ended
	Mar. 31, 2022
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 net loss per share for the periods ended March 31, 2022 and 2021 (net loss in thousands, loss per share in dollars): Three months ended March 31, 2022 2021 Numerator: Net loss $ (24,837) $ (21,290) Denominator: Weighted-average shares outstanding - basic and diluted 481,941,527 469,465,085 Net loss per share - basic and diluted $ (0.05) $ (0.05) During the three months ended March 31, 2022 and 2021, outstanding share options, RSUs and warrants over 60,576,894 and 77,584,846 ordinary shares, respectively, were not included in the computation of diluted earnings per ordinary share, because to do so would be antidilutive.

Basis of presentation and sum_2

Basis of presentation and summary of significant accounting policies (Policies)	3 Months Ended
	Mar. 31, 2022
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 March 3, 2022 (the “2021 Form 10-K”). The Consolidated Balance Sheet as of December 31, 2021, was derived from audited consolidated financial statements included in the 2021 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.
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, the fair value of share-based compensation, the fair value of warrants, research and development tax credit and the carrying value of the equity interest in Nuance Pharma (as defined below). 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.
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)	3 Months Ended
	Mar. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Summary of Prepaid Expenses	Prepaid expenses consisted of the following (in thousands): March 31, December 31, 2022 2021 Clinical trial and other development costs $ 452 $ 2,169 Insurance 435 1,555 Other 359 313 Total prepaid expenses $ 1,246 $ 4,037

Tax and tax incentive receiva_2

Tax and tax incentive receivable (Tables)	3 Months Ended
	Mar. 31, 2022
Receivables [Abstract]
Components of Taxes Receivable	Tax and tax incentive receivables consisted of the following (in thousands): March 31, December 31, 2022 2021 Research and development tax credit receivable - U.K. $ 16,420 $ 15,583 Total tax receivable $ 16,420 $ 15,583

Accrued expenses (Tables)

Accrued expenses (Tables)	3 Months Ended
	Mar. 31, 2022
Payables and Accruals [Abstract]
Schedule of Accrued Expenses	Accrued expenses consisted of the following (in thousands): March 31, December 31, 2022 2021 Clinical trial and other development costs $ 27,520 $ 21,336 Professional fees and general corporate costs 846 919 People related costs 511 1 Total accrued expenses $ 28,877 $ 22,256

Share based compensation (Table

Share based compensation (Tables)	3 Months Ended
	Mar. 31, 2022
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 selling, general and administrative costs (in thousands): Three months ended March 31, 2022 2021 Research and development $ 1,539 $ 3,432 Selling, general and administrative 2,209 5,418 Total $ 3,748 $ 8,850
Share Option Activity	The following table shows share option activity, in ordinary shares, in the period: 2022 Number of share options outstanding Weighted average exercise price Outstanding at January 1 12,695,200 $ 1.38 Granted 608,000 0.62 Outstanding at March 31 13,303,200 $ 1.34
Restricted Stock Unit Activity	The following table shows restricted stock unit (“RSU”) activity, in ordinary shares, in the period: 2022 Number of RSUs outstanding Weighted average remaining contractual term (years) Outstanding at January 1 38,347,352 1.2 Granted 468,224 Vested (3,943,144) Outstanding at March 31 34,872,432 1.1

Net loss per share (Tables)

Net loss per share (Tables)	3 Months Ended
	Mar. 31, 2022
Earnings Per Share [Abstract]
Computation of Basic and Diluted Earning Per Share	The following table shows the computation of basic and diluted net loss per share for the periods ended March 31, 2022 and 2021 (net loss in thousands, loss per share in dollars): Three months ended March 31, 2022 2021 Numerator: Net loss $ (24,837) $ (21,290) Denominator: Weighted-average shares outstanding - basic and diluted 481,941,527 469,465,085 Net loss per share - basic and diluted $ (0.05) $ (0.05)

Organization, Consolidation and

Organization, Consolidation and Presentation of Financial Statements (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2022USD ($)subsidiary$ / sharesshares	Dec. 31, 2021USD ($)	Mar. 19, 2021USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of wholly owned subsidiaries | subsidiary	1
Class of Stock [Line Items]
Accumulated deficit	$ 288,739	$ 263,716
Number of shares issued in sale | shares	80,696
Price per share (in dollars per share) | $ / shares	$ 0.86
Consideration received from sale of stock	$ 100
American Depository Shares
Class of Stock [Line Items]
Maximum aggregate offering price			$ 100,000
Number of shares issued in sale | shares	10,087
Price per share (in dollars per share) | $ / shares	$ 6.86
Shares available for sale	$ 99,200

Basis of presentation and sum_3

Basis of presentation and summary of significant accounting policies (Details)	3 Months Ended
	Mar. 31, 2022segment
Accounting Policies [Abstract]
Number of operating segments	1
Number of reportable segments	1

Prepaid expenses (Details)

Prepaid expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Clinical trial and other development costs	$ 452	$ 2,169
Insurance	435	1,555
Other	359	313
Total prepaid expenses	$ 1,246	$ 4,037

Tax and tax incentive receiva_3

Tax and tax incentive receivable (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Receivables [Abstract]
Research and development tax credit receivable - U.K.	$ 16,420		$ 15,583
Total tax receivable	16,420		$ 15,583
Research and development tax credit excluding annual cap	3,600
Research and development tax credit	$ 1,302	$ 2,070

Accrued expenses (Details)

Accrued expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Payables and Accruals [Abstract]
Clinical trial and other development costs	$ 27,520	$ 21,336
Professional fees and general corporate costs	846	919
People related costs	511	1
Total accrued expenses	$ 28,877	$ 22,256

Term loan (Details)

Term loan (Details) - USD ($) $ in Thousands	1 Months Ended
	Nov. 30, 2020	Mar. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Carrying value of term loan		$ 4,928	$ 4,874
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

Equity Interest (Details)

Equity Interest (Details) - Nuance (Shanghai) Pharma Co Ltd - USD ($) $ in Millions	Mar. 31, 2022	Jun. 09, 2021
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Transaction price		$ 40
Accounts receivable		25
Equity interest receivable	$ 15	$ 15

Significant agreements (Details

Significant agreements (Details) $ in Thousands	1 Months Ended	3 Months Ended
	Mar. 31, 2022USD ($)tradingDay	Mar. 31, 2022USD ($)	Jun. 09, 2021USD ($)
Ligand UK Development Limited
Capitalized Contract Cost [Line Items]
Sublicense payment	$ 2,000
Sublicense payment, equity issuance, threshold trading days | tradingDay	10
Ligand UK Development Limited | First Commercial Sale
Capitalized Contract Cost [Line Items]
Sublicense payment	$ 15,000
Ligand UK Development Limited | Selling, General and Administrative Expenses
Capitalized Contract Cost [Line Items]
Sublicense payment		$ 2,000
Nuance (Shanghai) Pharma Co Ltd
Capitalized Contract Cost [Line Items]
Transaction price			$ 40,000
Accounts receivable			25,000
Equity interest receivable	15,000	15,000	15,000
Future eligible milestone payments			179,000
Deferred revenue	$ 25,000	$ 25,000	$ 25,000

Share based compensation - Shar

Share based compensation - Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total	$ 3,748	$ 8,850
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total	1,539	3,432
Selling, general and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total	$ 2,209	$ 5,418

Share based compensation - Sh_2

Share based compensation - Share Option Activity (Details)	3 Months Ended
	Mar. 31, 2022$ / sharesshares
Number of share options outstanding
Beginning balance outstanding | shares	12,695,200
Granted | shares	608,000
Ending balance outstanding | shares	13,303,200
Weighted average exercise price
Outstanding, Beginning Balance, Weighted average exercise price (in dollars per share) | $ / shares	$ 1.38
Granted, Weight average exercise price (in dollars per share) | $ / shares	0.62
Outstanding, Ending Balance, Weighted average exercise price (in dollars per share) | $ / shares	$ 1.34

Share based compensation - RSU

Share based compensation - RSU Activity (Details) - Restricted Stock Units - shares	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
RSU Activity
Outstanding, beginning balance	38,347,352
Granted	468,224
Vested	(3,943,144)
Outstanding, ending balance	34,872,432	38,347,352
Outstanding, Weighted average remaining contractual term	1 year 1 month 6 days	1 year 2 months 12 days

Net loss per share - Computatio

Net loss per share - Computation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Numerator:
Net loss	$ (24,837)	$ (21,290)
Denominator:
Weighted-average shares outstanding, basic (in shares)	481,941,527	469,465,085
Weighted-average shares outstanding, diluted (in shares)	481,941,527	469,465,085
Net loss per share, basic (in dollars per share)	$ (0.05)	$ (0.05)
Net loss per share, diluted (in dollars per share)	$ (0.05)	$ (0.05)
Antidilutive securities excluded from computation of loss per share (in shares)	60,576,894	77,584,846