Verona said it had completed a series of successful clinical trials on its flagship drug to treat chronic obstructive pulmonary disease (COPD), RPL554.
RPL554 is in phase II trials as a treatment for acute exacerbations of COPD in hospital.
The drug has both bronchodilator and anti-inflammatory effects essential in treating patients with COPD and asthma.
Verona said clinical data with a new formulation of RPL554 had strongly supported its continued development.
It added that positive headline data from a phase IIa dose-finding study in asthma patients in this financial year had demonstrated good results.
But Verona's shares fell 0.25p, or 7.5%, to 3.08p after it reported a post-tax loss of £7.42mln against £2.76mln a year earlier.
The group blamed higher research and development spending and said it was keeping tight control of costs.
It added that the higher losses were broadly in line with market expectations. It made a loss per share of 0.73p (2014: 0.32p)
Net cash outflows from operating activities during the year were £6.35mln against £3.54mln in 2014, which Verona said reflected clinical progre.ss.
Cash and cash equivalents at the end of last year were £3.52mln versus £9.97mln a year earlier.
Chief executive Jan-Anders Karlsson said Verona had made substantial clinical progress with RPL554 during the year.
"To date, over 275 subjects have been included in clinical trials with RPL554, which have consistently shown that the drug is well tolerated, generating highly significant and clinically meaningful data," he said.
"COPD affects over 300 million people worldwide and to date there has been limited true innovation in developing better medicines.
"RPL554, with its novel mode of action, represents a very attractive commercial opportunity for generating significant value for shareholders.”