Verona Pharma announces $650M strategic financing with Oaktree, OMERS

Verona Pharma announces it and its wholly-owned subsidiary, Verona Pharma, have 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 US launch of ensifentrine and will support the Company’s continued growth. Ensifentrine is currently under review by the US Food and Drug Administration 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: 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. The debt facility replaces the existing facility of up to $400 million with funds managed by Oxford Finance LLC 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 US and in the US, 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.