Verona Pharma and its wholly-owned subsidiary, VPI, entered into strategic financing agreements providing access to up to $650 million from funds managed by Oaktree Capital Management and OMERS Life Sciences.
The agreements provide non-dilutive capital and additional financial flexibility ahead of Verona Pharma’s planned U.S. launch of ensifentrine and will support the company’s continued growth. Ensifentrine is currently under review by the US Food and Drug Administration (FDA) and, if approved, is expected to be the first novel inhaled mechanism for the maintenance treatment of chronic obstructive pulmonary disease in more than 20 years.
The strategic financing was led by Oaktree and is comprised of the following:
- Debt facility:Up to $400 million in term loans available in five separate tranches via a term loan facility.
- Revenue interest purchase and sale agreement (RIPSA): Up to $250 million in funding from the sale of a redeemable interest in future ensifentrine-related revenue, which is capped at 1.75x of the amount funded.
_x000D_
_x000D_
The debt facility replaces the existing facility of up to $400 million with funds managed by Oxford Finance and Hercules Capital.
Under the terms of the debt facility, VPI is drawing $55 million at closing and may draw, subject to certain conditions, an additional $70 million upon FDA approval of ensifentrine, $175 million in two separate tranches upon achievement of certain net sales milestones and, subject to the approval of the lenders, $100 million to support strategic initiatives. VPI will pay only interest on the outstanding loans under the five-year debt facility on a quarterly basis with all amounts outstanding due at maturity. Approximately $52 million of the loans drawn at closing will be used to repay in full the existing facility, including to pay fees and associated costs thereunder.
Under the terms of the RIPSA, VPI will receive $100 million upon FDA approval of ensifentrine and will be eligible to draw an additional $150 million upon the achievement of certain net sales milestones. The revenue interest financing rate is 5% and 6.5% of certain proceeds the company receives from licensees that the company may engage during the term of the RIPSA outside of the U.S. and in the U.S., respectively, and 6.5% of global net sales of ensifentrine by the company. The total revenue interest financing payable by the company to Oaktree and OMERS is capped at 1.75x of the amount actually funded, with the ability to redeem the RIPSA at lower multiples within the first three years from funding.
“As we finalize preparations for the potential U.S. approval and commercial launch of ensifentrine, we are pleased to be working with Oaktree and OMERS, who are aligned with our view of ensifentrine’s importance to the COPD community and its commercial opportunity,” David Zaccardelli, president and CEO of Verona Pharma, said. “This strategic agreement, with access to up to $650 million, allows us to further strengthen our cash position and improve our financial flexibility. These funds, together with our existing cash of $255 million, are expected to support the company through commercialization and growth beyond 2026.”
“We believe ensifentrine’s impressive clinical data generated to date and unique mechanism of action position it well to become a paradigm-shifting advancement in the maintenance treatment of COPD, a condition with continued unmet need,” Aman Kumar, co-portfolio manager for Oaktree’s life sciences lending platform, said. “This strategic investment in Verona Pharma underscores Oaktree’s commitment to provide flexible capital solutions to innovative life sciences companies that are working on bringing important therapies to patients and providers worldwide.”
Morgan Stanley acted as sole structuring agent on the transaction. Latham & Watkins served as legal counsel to Verona Pharma. Sullivan & Cromwell served as legal counsel to Oaktree.
