Verona Pharma Raises $200 Million in Oversubscribed Private Placement and Subscription

Funding to support Phase 3 ENHANCE clinical program in COPD

LONDON, UK, and RALEIGH, NC, July 17, 2020 – Verona Pharma plc (AIM: VRP) (Nasdaq: VRNA) (“Verona Pharma” or the “Company”), a clinical-stage biopharmaceutical company focused on respiratory diseases, announces it has raised approximately $200 million (£159 million*) in an oversubscribed private placement and subscription with new and existing institutional and accredited investors (the “Financing”). The Financing comprises a private placement of 39,090,009 of the Company’s American Depositary Shares (“ADSs”), each representing eight ordinary shares of the Company (“Ordinary Shares”), at a price of $4.50 per ADS, and 43,111,112 of the Company’s Ordinary Shares at the equivalent price per Ordinary Share, being £0.45 or $0.5625 (together the “Securities”).

Verona Pharma anticipates net proceeds of the Financing will be approximately $183 million after deducting placement agent fees and estimated expenses.

The Financing was led by new investors RA Capital Management, Access Biotechnology, Perceptive Advisors, Acorn Bioventures, PBM Capital, Samsara BioCapital, Foresite Capital, Sphera, Fairmount and Soleus Capital, as well as additional investors. Existing investors, OrbiMed, New Enterprise Associates (NEA), Vivo Capital, Abingworth, Novo Holdings A/S, Polar Capital and Aisling Capital also participated.

Jefferies LLC (“Jefferies”) is acting as the lead placement agent to the Company in connection with the Financing.

Verona Pharma intends to use the net proceeds from the Financing primarily to fund its Phase 3 clinical program ENHANCE (Ensifentrine as a Novel inHAled Nebulized COPD thErapy) in chronic obstructive pulmonary disease (COPD) and for general corporate purposes. The Phase 3 clinical trials are planned to start later in 2020.

“We are extremely pleased to have received support from this group of highly experienced life science investors who understand the potential benefit of ensifentrine for patients with COPD,” said David Zaccardelli, Pharm. D., President and CEO of Verona Pharma. “With this financing we plan to initiate our Phase 3 ENHANCE clinical trials later this year and expect to support our programs into 2023. This important milestone brings us closer to our goal of ensuring ensifentrine is available for millions of COPD patients who urgently need additional treatment options.”

Director Interests

In connection with the Financing, certain Directors and an Officer of the Company (the “Participating Directors and Officer”) intend to subscribe for new ordinary shares or ADSs at the applicable price per ordinary share or per ADSs to contribute, in aggregate, gross proceeds of approximately $955,000.

Each of the Participating Directors and Officer has agreed to participate in the Financing by acquiring such number of Securities at the applicable price (rounded down to the nearest whole share) as is equal to the following participation amounts:

Further dealing disclosures will be made in accordance with MAR in respect of the above transactions by Persons Discharging Managerial Responsibility (PDMR).

Related Party Transactions

As of July 15, 2020, Novo Holdings A/S and Vivo Capital held approximately 11.63 per cent and 11.21 per cent, respectively, of Verona Pharma’s issued ordinary share capital and as such each is considered to be a related party of the Company as defined in the AIM Rules for Companies. The participations by Novo Holdings A/S and Vivo Capital in the Financing are deemed to each constitute a related party transaction pursuant to AIM Rule 13 (the “Related Party Transactions”).

The Independent Directors (being for this purpose the directors of the Company other than the Participating Directors and Dr Mahendra Shah appointed by Vivo Capital) consider, having consulted with N+1 Singer, the Company’s nominated adviser for the purposes of the AIM Rules, that the terms of each of the Related Party Transactions are fair and reasonable insofar as the shareholders of the Company are concerned.

Restriction on further issue of securities

The Company has undertaken to the investors that, between July 16, 2020 and 90 calendar days after Closing, it will not, without the prior written consent of Jefferies, directly or indirectly issue or allot any Ordinary Shares or equivalent securities, subject to customary exceptions and waiver by Jefferies.

Further details of Financing

The Securities will represent 77.0% of the issued share capital as enlarged for the Financing. The issue price of the Securities represents a discount of approximately 4.7% to the closing mid-market price of $4.72 per ADS on July 15, 2020, being the last practicable date before the pricing of the Financing. The issuance of the Securities is being made under the Company’s existing authority to issue new securities on a non pre-emptive basis, as granted at the recent Annual General Meeting of shareholders on April 16, 2020.

The issuance of the Securities is expected to close on July 22, 2020 (“Closing”). Of the Securities, 312,720,080 of the Securities will be voting Ordinary Shares represented by 39,090,009 ADSs, 222,216 will be voting Ordinary Shares, and 42,888,896 will be non-voting Ordinary Shares. Application is expected to be made to the London Stock Exchange for the voting Ordinary Shares to be admitted to trading on AIM (“Admission”) at 0800 BST on July 23, 2020. A further announcement will be made confirming Closing and Admission.

Important Information

The offer and sale of the foregoing securities are being made in a transaction not involving a public offering and have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or applicable state securities laws, and will be sold in a private placement pursuant to Section 4(a)(2) and Regulation D of the Securities Act. The securities being issued in the Financing may not be offered or sold in the United States absent registration or pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws. Verona Pharma has agreed to file a registration statement with the Securities and Exchange Commission (“SEC”) registering the resale of the ADSs sold in the Financing.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any state in which such offer or sale would be unlawful prior to the registration or qualification under the securities laws of such state.

*The conversion of pounds sterling to U.S. dollars in this press release is based on an exchange rate of £0.7973 per US$1.00 as of July 15, 2020.

About Ensifentrine

Ensifentrine (RPL554) is an investigational, first-in-class, inhaled, dual inhibitor of the enzymes phosphodiesterase 3 and 4 (PDE3 and PDE4). This dual inhibition enables it to combine both bronchodilator and anti-inflammatory effects in one compound. Ensifentrine has demonstrated significant and clinically meaningful improvements in both lung function and COPD symptoms, including breathlessness, in Verona Pharma’s prior Phase 2 clinical studies in patients with moderate to severe COPD. In addition, nebulized ensifentrine showed further improved lung function and reduced lung volumes in patients taking standard short- and long-acting bronchodilator therapy, including maximum bronchodilator treatment with dual/triple therapy. Ensifentrine has been well tolerated in clinical trials involving more than 1,300 people to date.

About Verona Pharma

Verona Pharma is a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapies for the treatment of respiratory diseases with significant unmet medical needs. If successfully developed and approved, Verona Pharma’s product candidate, ensifentrine, has the potential to be the first therapy for the treatment of respiratory diseases that combines bronchodilator and anti-inflammatory activities in one compound. Following a response from the U.S. FDA to Verona Pharma’s End-of-Phase 2 briefing package, the Company is accelerating preparations for the Phase 3 clinical program ENHANCE (Ensifentrine as a Novel inHAled Nebulized COPD thErapy) to start later in 2020. Verona Pharma is currently in Phase 2 development with two additional formulations of ensifentrine for the treatment of COPD: dry powder inhaler and pressurized metered-dose inhaler. Ensifentrine also has potential applications in cystic fibrosis, asthma and other respiratory diseases. For more information, please visit www.veronapharma.com