The QCA Code

The sections below set out the ways in which Verona Pharma applies the ten principles of the QCA Code in support of the Company’s medium to long-term success.

Principle 1: Establish a strategy and business model that promotes long-term value for shareholders

Our vision is to become a leader in developing innovative treatments for respiratory diseases with significant unmet medical needs. Our current focus is on our lead product candidate, ensifentrine (RPL554), a first-in-class, inhaled, dual inhibitor of the enzymes phosphodiesterase 3 and 4 that has been shown to act as both a bronchodilator and an anti-inflammatory agent in a single compound. Ensifentrine delivered in a nebulized formulation is currently in Phase 2b clinical development for the maintenance treatment of COPD and is planned to enter Phase 3 trials in 2020. Our market research shows that nebulized delivery is the preferred route of administration for more severe COPD patients, especially in the US, thus providing an attractive commercial opportunity. We are also developing a dry powder (“DPI”) and a pressurised metered dose inhaler (“pMDI”) formulation of ensifentrine. Successful development of a pMDI or DPI formulation of ensifentrine for moderate disease could greatly expand the addressable market for the drug and represents a multi-billion dollar potential opportunity.  We anticipate that we would partner the DPI/MDI formulations later in development in order to realize the potential of this opportunity. We may also explore the development of ensifentrine in pMDI and/or DPI formulations for the treatment of cystic fibrosis and asthma.

Our strategy and business operations are described in more detail in the Company’s most recent UK Annual Report and Annual Report on Form 20-F in the United States. The Company operates in an inherently high risk and heavily regulated sector and the principal risks and uncertainties are summarised in the UK Annual Report and disclosed in detail in the Annual Report on Form 20-F in the United States.

Principle 2: Seek to understand and meet shareholder needs and expectations

The Company seeks to maintain a regular dialogue with both existing and potential new shareholders in order to communicate the Company’s strategy and progress and to understand the needs and expectations of shareholders.

Beyond the Annual General Meeting, the Chief Executive Officer, Chief Financial Officer and, where appropriate, other members of the senior management team, meet regularly with investors and analysts to provide them with updates on the Company’s business and to obtain feedback regarding the market’s expectations of the Company.

Audited Annual Reports are distributed and quarterly financial results and operational reviews are notified via Regulatory News Service announcements. All financial reports, press releases and filings to the Securities and Exchange Commission (“SEC”) are made available on the Company’s website. Verona Pharma regularly participates at investor conferences and where applicable, makes webcast recordings of these events available within the “investors” section of this website.

Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Company is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include the Company’s employees, partners, suppliers, regulatory authorities and the patients involved in the Company’s clinical development activities. The Company’s operations and working methodologies take account of the need to balance the needs of all of these stakeholder groups while maintaining focus on the Company’s primary responsibility to promote the success of the Company for the benefit of its members as a whole.

Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation.

The Board assesses the principal risks and uncertainties facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. The principal risks and uncertainties are summarised in the UK Annual Report and disclosed in detail in the Annual Report on Form 20-F in the United States.

The Board, through the Audit Committee, is responsible for the systems of internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. The senior management team meet regularly to consider new risks and opportunities facing the Company and make recommendations to the Board and/or Audit Committee as appropriate.

In addition to consideration of financial risk as part of the review of broader internal control, the Company is required to assess and report on the effectiveness of the internal controls over financial reporting under Section 404(a) of the Sarbanes-Oxley Act.

The Company maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material loss or claims against the Company. The insured values and type of cover are reviewed on an annual basis.

Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair.

The Company’s Board currently comprises 8 Non-executive Directors and one Executive Director. The Board reviews the independence of all the Non-Executive Directors. At the time of the 2018 Annual Report, the Board determined that all the Non-Executive Directors qualified as independent Directors under Rule 5605(a)(2) of the Nasdaq Listing Standards and believed them to be independent under UK corporate governance standards.

All of the Directors are subject to election by shareholders at the first Annual General Meeting after their appointment to the Board and will continue to seek re-election at least once every three years.

The Board typically has 6 scheduled meetings per year, with additional Board meetings and Board sub-committee meetings convened as circumstances and business needs dictate. The attendance record of each of the directors is disclosed in the Corporate Governance Report in the UK Annual Report.

The Board is responsible to the shareholders for the proper management of the Group and sets the overall direction and strategy of the Group, reviews scientific, operational and financial performance, and advises on management appointments. All key operational and investment decisions are subject to Board approval. There is a clear separation of the roles of Chief Executive Officer and Non-Executive Chairman. The Board has Audit, Remuneration, and Nomination and Corporate Governance Committees, each with written terms of reference stating their authorities and duties. The full terms of reference of the Committees are available within the “corporate governance” section of this website.

Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities.

The Board considers each Non-Executive Director is of sufficient competence and calibre to add strength and objectivity to the Board, and the Board regularly reviews the composition of the Board to ensure that this is maintained. The Board contains the necessary skills to support the Company in the development of ensifentrine, and to support the financial and regulatory obligations as a dual-listed Company in the United Kingdom and United States. The Directors’ bios can be found in the “about us” section of this website.

Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.

The Remuneration Committee oversees the annual evaluation of the performance of the Chief Executive Officer, and the Nomination and Corporate Governance Committee oversees the review and evaluation of the Board as a whole, the Committees and the individual Directors. The Board evaluations are conducted annually through use of a confidential questionnaire completed by each Director. The questionnaire covers topics including the composition of the Board and Committees, oversight of management, understanding the business, and the conduct and effectiveness of board meetings. The results are collated and analysed by our Company Secretary and anonymised results are shared with and discussed by the Board with areas for improvement identified where appropriate.  The formality and complexity of the process is considered appropriate for a company of Verona Pharma’s size and stage of development and the Board will continue to review the process and make any changes as appropriate should this position change. The Nomination and Corporate Governance Committee is responsible for managing succession planning for Directors.

Principle 8: Promote a corporate culture that is based on ethical values and behaviours.

The Board believes that the promotion of corporate culture based on sound ethical values and behaviours is essential to maximise shareholder value. The Company maintains a Code of Business Conduct and Ethics to which it expects all employees and directors of Verona Pharma to adhere. This code is intended to promote the conduct of all Company business in accordance with high standards of integrity and in compliance with all applicable laws and regulations.

Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.

The Board is responsible to the shareholders for the proper management of the Company and sets the overall direction and strategy of the Company, reviews scientific, operational and financial performance, and advises on management appointments. The Non-Executive Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-Executive Directors are properly briefed on matters. The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day to day business activities of the Company.

All key operational and investment decisions are subject to Board approval. The Board has Audit, Remuneration and Nomination and Corporate Governance Committees and their terms of reference are available within the “corporate governance” section of this website.

Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

The Board recognises that meaningful engagement with its shareholders is central to the success of the business. The Board seeks to engage with shareholders, while the Non-Executive Chairman and Chief Executive Officer ensure that the views of the shareholders are communicated to the Board as a whole. The Board seeks to make itself available to shareholders including at the Company’s annual general meeting at which the Directors are available to discuss aspects of the Company’s performance and shareholders have the opportunity to question management in more detail.

The work of the Audit, Remuneration, and Nomination and Corporate Governance Committees is described in Principle 9 of this disclosure. A Report from the Remuneration Committee is presented in the UK Annual Report. Audited Annual Reports are distributed to shareholders and quarterly financial results and operational reviews are notified via Regulatory News Service announcements. All press releases, filings with the SEC and financial reports are made available through the “investors” section of this website.

 

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Verona Pharma plc
3 More London Riverside, London SE1 2RE
T: +44 (0)203 283 4200

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