17 June 2016, Cardiff – Verona Pharma plc (AIM: VRP), the drug development company focused on first-in-class medicines to treat respiratory diseases, announces that it has successfully secured funding commitments to raise gross proceeds of c. £44.7 million (US$63.3 million), through a conditional placing (the “Placing”) with new and existing investors, including a number of specialist US, UK and European healthcare funds. The Placing was significantly oversubscribed.

The net proceeds of the Placing are expected to fund RPL554 through a Phase 2b clinical trial in chronic obstructive pulmonary disease (COPD) patients and additional Phase 2 studies in both COPD and cystic fibrosis.

MTS Securities, LLC is acting as the US placement agent and N+1 Singer is acting as the UK broker and nominated adviser in connection with the Placing. The Placing is not being underwritten.

Highlights

•The Placing will raise gross proceeds of c. £44.7 million (US$63.3 million) through the issue of 1,555,796,345 Units at a price of 2.873 pence per Unit (each comprising one Placing Share and one Warrant)
• The net proceeds of the Placing will predominantly be used to progress RPL554 through a Phase 2b clinical trial in COPD patients, and to fund additional clinical Phase 2 studies in COPD and cystic fibrosis as well as further supportive pre-clinical work
• The funding enables the Company to materially advance the development of RPL554 and build on the significant progress made to date with the revised formulation
• The cornerstone investors in the Placing are specialist healthcare focused funds Vivo Capital, OrbiMed and Edmond de Rothschild Investment Partners
• Other new investors include New Enterprise Associates, Novo A/S, Abingworth and Aisling Capital with participation of existing investors including Arix Bioscience, Hargreave Hale and Polar Capital
•The Placing Price represents the average closing mid-market price of an Ordinary Share during the five trading days to 15 June 2016, being the last practicable date prior to investors signing their binding Placing commitments
• Each Warrant will be exercisable into 0.4 of a Warrant Share, at an exercise price per Warrant Share of 3.4476 pence, being 120 per cent. of the Issue Price
• On or shortly after Admission, representatives from certain of the investors will join the Board as non-executive directors
• The Company has undertaken to use commercially reasonable efforts to procure a listing on NASDAQ and raise a further tranche of funding in the future

The Placing is conditional upon, amongst other things, approval by existing shareholders at a general meeting to be held at 11.00 a.m. on 22 July 2016 at the offices of Shakespeare Martineau LLP at Allianz House, 6th Floor, 60 Gracechurch Street, London, EC3V 0HR (the “General Meeting”). Admission of the Placing Shares to trading on AIM is expected to take place on 29 July 2016.

Jan-Anders Karlsson, CEO of Verona Pharma, commented:

“We have made significant clinical progress with our first-in-class drug RPL554. This drug has shown the potential to become an important novel and complementary treatment option for patients with COPD, a debilitating and progressive disease that impacts about 65 million people worldwide and is still among the four leading causes of death globally.

“The funds raised from the Placing will allow the Company to focus on conducting a comprehensive Phase 2b clinical trial programme for nebulised RPL554 as a potential treatment for patients with COPD. We will also explore in the clinic for the first time the use of RPL554 as a novel treatment for cystic fibrosis expanding the potential of the drug into another respiratory disease where there remains a significant unmet need. This follows on from the compelling data we have generated in translational, preclinical models of this disease.”)

David Ebsworth, Non-Executive Chairman of Verona Pharma added:

“The Board would like to thank both the proposed new and our existing shareholders for their support. Indeed, this powerful syndicate of highly experienced bioscience investors have conducted significant due diligence in the product ahead of investing in the proposed Placing announced today, which we believe further attests to the potential value of RPL554.

“A subsequent listing of ADSs on NASDAQ as part of a US IPO for Verona Pharma is a natural evolution in our corporate strategy to focus on the US market opportunity, with its broadly accepted use of nebulisers in the treatment of patients with COPD. It will also allow the Company easier access to a larger pool of investors in the US who have a deep understanding of the healthcare market in which Verona Pharma operates.”)

The Company’s lead drug, RPL554, is a dual phosphodiesterase PDE3/PDE4 inhibitor with both bronchodilator and anti-inflammatory properties that has the potential to become a novel treatment for patients with obstructive lung diseases such as chronic obstructive pulmonary disease (COPD), cystic fibrosis and potentially asthma. Furthermore, based on data generated to date, Verona Pharma believes RPL554 can provide relevant clinical and health economic benefits in a commercial setting. A circular to Shareholders containing, amongst other things, the notice of the General Meeting (the “Circular”) will be published by the Company today and posted to Shareholders. An extract from the Circular is set out below. Copies of the Circular will be available at the Company’s website: www.veronapharma.com.

This announcement should be read in conjunction with the Circular in its entirety, which contains further details on the terms of the Placing and related matters.