Caligan Partners LP, founded by former Carlyle Group managing director David Johnson, has announced a significant investment in Verona Pharma (VRNA), a biopharmaceutical company focused on respiratory disease therapies. Caligan sees substantial opportunity to unlock value, primarily driven by Verona's recently FDA-approved drug, Ohtuvayre (ensifentrine), for maintenance treatment of chronic obstructive pulmonary disease (COPD).
Ohtuvayre: A Promising COPD Treatment
Ohtuvayre (ensifentrine) is an inhaled dual inhibitor of phosphodiesterase 3 (PDE3) and phosphodiesterase 4 (PDE4). It functions as both a bronchodilator and an anti-inflammatory agent. The drug was approved by the FDA on June 26 for COPD maintenance. Phase III clinical trials have demonstrated a significant increase in lung function and a reduction in exacerbations with minimal side effects. These results suggest Ohtuvayre could capture a substantial share of the COPD market, where over 4 million U.S. patients remain symptomatic despite current treatments.
COPD affects over 380 million people globally and is the third leading cause of death worldwide. In the U.S. alone, COPD management accounts for over $24 billion in healthcare costs. Caligan believes Ohtuvayre has the potential to improve patient outcomes and reduce healthcare costs significantly.
Expansion Potential: Non-Cystic Fibrosis Bronchiectasis (NCFB)
Beyond COPD, Verona Pharma is exploring the use of Ohtuvayre for non-cystic fibrosis bronchiectasis (NCFB), a progressive inflammatory disease with no currently approved therapies. NCFB affects over 1 million patients, presenting a significant expansion opportunity for Ohtuvayre. Early pooling analysis has indicated a 41% reduction in exacerbations in COPD patients, which is almost double the 21% reduction rate seen in Phase III testing of Insmed's brensocatib, a potential competitor in the NCFB market.
Financial Outlook and Market Potential
Caligan estimates that if Verona achieves a 10% patient share in the COPD market, Ohtuvayre could generate $4.5 billion in revenue. Given that mergers and acquisitions for similar companies typically occur at 3 to 4 times peak revenue, Caligan projects a potential valuation of $115 per share for Verona. If Ohtuvayre gains traction in NCFB treatment, Caligan believes Verona Pharma could be worth 7 times its current valuation, or $218 per share.
Caligan's Investment Strategy
Caligan exclusively invests in the healthcare sector, focusing on companies with differentiated intellectual property and durable assets. The firm aims to work constructively with company boards and management to unlock value. Caligan's investment in Verona Pharma reflects its confidence in Ohtuvayre's potential to improve the standard of care for patients and generate significant returns.
