Verona Pharma Secures $650 Million from Oaktree and OMERS

Verona Pharma plc, along with its subsidiary Verona Pharma, Inc., has secured strategic financing agreements worth up to $650 million from Oaktree Capital Management, L.P., and OMERS Life Sciences. This funding will support the US commercial launch and expansion of ensifentrine's clinical activities, extending the company’s financial runway beyond 2026. Ensifentrine, currently under review by the US Food and Drug Administration (FDA), could become the first novel inhaled treatment for chronic obstructive pulmonary disease (COPD) in over 20 years if approved.

The financing arrangement, primarily led by Oaktree, consists of two main components: a debt facility and a revenue interest purchase and sale agreement (RIPSA). The debt facility provides up to $400 million in term loans to be accessed in five tranches. Meanwhile, the RIPSA includes up to $250 million in funding linked to future revenues from ensifentrine, capped at a rate of 1.75 times the amount funded.

The debt facility supersedes an earlier $400 million facility from Oxford Finance LLC and Hercules Capital, Inc. Initially, $55 million will be drawn, with potential additional draws of $70 million upon FDA approval of ensifentrine, $175 million upon reaching specified sales milestones, and $100 million for strategic initiatives, subject to lender approval. A portion of the initial loan, approximately $52 million, will be utilized to repay the previous debt facility.

Under the RIPSA, $100 million will be accessible upon FDA approval, with an additional $150 million available upon achieving certain sales targets. The financing rate under this agreement is set at 5% and 6.5% for certain proceeds in and outside the US, respectively. The total repayment under RIPSA is capped at 1.75 times the amount funded, with an option for redemption at lower multiples within the first three years.

David Zaccardelli, President and CEO of Verona Pharma, expressed confidence in the agreement, highlighting how it aligns with the company's strategy to commercialize ensifentrine and strengthen financial flexibility. The funding, together with the company's current cash reserves of $255 million, is expected to support their operations and growth beyond 2026.

Aman Kumar, Co-Portfolio Manager for Oaktree’s Life Sciences Lending platform, emphasized the promising clinical data of ensifentrine and its potential to significantly impact the treatment of COPD, a condition with ongoing unmet medical needs. This investment underscores Oaktree's commitment to providing flexible capital solutions to innovative life sciences companies.

Verona Pharma's focus is on developing and commercializing therapies for chronic respiratory diseases. The FDA's acceptance of Verona Pharma’s New Drug Application (NDA) for ensifentrine marks a significant milestone. Ensifentrine has shown promise in Phase 3 trials, demonstrating significant improvements in lung function and a reduction in COPD exacerbation rates. Additional formulations, including dry powder inhaler and pressurized metered-dose inhaler, are also being evaluated for COPD treatment, with potential applications for other respiratory diseases like cystic fibrosis and asthma.

Oaktree Capital Management specializes in alternative investments, managing $192 billion in assets as of March 31, 2024, with a focus on value-oriented and risk-controlled approaches. OMERS Life Sciences offers non-dilutive financial solutions to biopharma companies, supporting their efforts to address unmet medical needs and improve patient quality of life.