Veru Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 10, 2023

There are 6 speakers on the call.

Operator

Morning, ladies and gentlemen, and welcome to Veru Inc. Investors Conference Call. All participants will be in listen only mode. After this morning's discussion, there will be an opportunity to ask questions. Please note that this event is being recorded.

Operator

I would now like to turn the conference call over to Mr. Sam Fish, Veru Inc. Executive Director, Investor Relations and Corporate Communications. Please go ahead.

Speaker 1

Good morning. The statements made on this conference call may be forward looking statements. Forward looking statements may include, but are not necessarily limited to, Statements of the company's plans, objectives, expectations or intentions regarding its business, operations, regulatory Your actions, finances and development and product portfolio. Such forward looking statements are subject to known and unknown risks And our actual results may differ significantly from those projected, suggested or included in any forward looking statements. Thanks, as well as in our press releases from time to time.

Speaker 1

I would now like to turn the conference call over to Doctor. Mitchell Steiner, Veru Inc. Chairman, CEO and President.

Speaker 2

Good morning. With me on this morning's call are Doctor. Gary Barnett, the Chief Scientific Officer Michelle Greco, the Chief Financial Officer and Chief Administrative Officer Michael Purvis, Executive Vice President, General Counsel of Corporate Strategy and Sam Fish, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. Veera is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of advanced breast cancer for acute respiratory distress syndrome related to viral lung infections.

Speaker 2

Our drug development program includes Zenovostarm, a And cebizobulin, a microtubule disruptor for the treatment of hospitalized COVID-nineteen and other types of viral related ARDS. The company also has an FDA approved commercial product, the FC2 female condom and internal condom, for the dual protection against unplanned pregnancy And sexually transmitted infections. The revenue from the sexual health program is being used to partially fund the clinical development of our late stage therapeutic candidates, which aim to address multibillion dollar premium market opportunities. We've had a very busy and productive Q3 fiscal year This morning, we will provide an update on the clinical development of the breast cancer and viral ARDS drug candidates, as well as the good progress on the commercialization of our FC2 product. We'll also provide financial highlights for our Q3 fiscal year 2023.

Speaker 2

Now as a regard to our oncology program, the company's oncology drug pipeline is focused on the clinical development of InnovusArm for the treatment of metastatic breast cancer. InovusArm is a different and new class of endocrine therapy for advanced breast cancer. InovusArm is an oral new chemical entity, Selective androgen receptor agonist that activates the androgen receptor and androgen receptor positive, estrogen receptor positive HER2 negative metastatic breast cancer to suppress tumor growth without the unwanted masculinizing side effects and Increases in hematocrit typically seen with androgens. Innovisarm has extensive non clinical and clinical experience, having been evaluated in 25 separate clinical studies in Approximately 1450 subjects' dose, including 3 Phase 2 clinical studies in advanced breast cancer involving more than 2 50 patients. In the 2 Phase 2 clinical studies conducted in women with androgen receptor positive HER2 negative metastatic breast cancer, Inovisarm demonstrates significant antitumor efficacy in heavily pretreated cohorts that failed estrogen blocking agents, Chemotherapy and the CDK4six inhibitors and it was well tolerated with a very favorable safety profile.

Speaker 2

The current standard of care for first line treatment of ER positive HER2 negative metastatic breast cancer is treatment with a CDK4six inhibitor in combination with an estrogen blocking agent. Once the patient progresses while receiving this combination therapy and if there's no specific genetic mutations are detected, The FDA approved treatment choices are limited to either another estrogen blocking agent or chemotherapy. As up to 90% of ER positive HER2 negative metastatic Breast cancers also have the androgen receptor, we're developing Inovisirn, a selective androgen receptor targeting agent As another, but very different hormone therapy for second line treatment of ER positive HER2 negative metastatic breast cancer. Preclinical studies, metastatic breast cancer tissue samples taken from patients who have ER positive HER2 negative metastatic breast cancer that's become resistant, The CDK4six inhibitors and estrogen blocking agents were grown in mice. In these mice, treatment with Inovusarm in combination with a CDK4six inhibitor the growth of the human metastatic breast cancer greater than the CDK4six inhibitor alone.

Speaker 2

Interestingly, the CDK4six inhibitor treatment Causes metastatic breast cancer tissue to make higher amounts of androgen receptor, which may explain the synergy of combining CDK4six inhibitor

Speaker 3

With Inovosarn, a selective

Speaker 2

AR agonist. Further, Inovosarn treatment alone was also effective in suppressing the growth of CDK4six inhibitor We're conducting a Phase 3 clinical ENABOLA-two study, which enobus our monotherapy or in combination of bemeciclib, which is an CDK4six inhibitor versus an estrogen blocking agent, which is the active control as a second line treatment for AR positive, ER positive, HER2 negative metastatic breast cancer. On March 30, 2023, the company met with FDA to gain further agreement on our Phase 3 clinical trial design and program. The Phase 3 study has been amended to accommodate the FDA's latest recommendations to support the registration of the Novusarm as a 2nd line treatment for patients with AR positive, ER positive, HER2 negative metastatic breast cancer who had tumor progression while receiving a CDK4six inhibitor plus an estrogen blocking agent, in other words, first line. The Phase 3 enablers 2 study has 2 stages.

Speaker 2

In Stage 1 of the Phase 3 study, the objectives are to optimize the dose of Inovisarm in the combination with abemaciclib And to assess the efficacy of Novusarm as a monotherapy. In the clinical trial design of Stage 1, we will enroll 160 patients into five The arms are as follows: estrogen blocking agent, which is the active control abemaciclib and Novosarm 9 milligram combination therapy, abemaciclib plus Inovisarm 3 milligram combination therapy, imemaciclib plus Inovisarm 1 milligram combination therapy and Inovisarm 9 milligram monotherapy. Primary endpoint for the Stage 1 is an objective tumor response rates, also referred to as ORR. We are currently producing clinical supply 1 milligram and 3 milligram Inovisarm capsules for the additional dose optimization arms, which is expected to be available early next quarter. The Stage 1 initial run-in enrolled 3 patients to assess the safety and pharmacokinetics of abemaciclib plus a Novosarm 9 milligram combination.

Speaker 2

In this run-in portion, there were no drug drug interactions between abemaciclib and Inovosarm Further, the early preliminary clinical results show 2 partial responses, One stable disease in the first three patients based on local assessments and all patients are or were on study for over 9 months. By way of reference, the objective tumor response rates are about 4% for the estrogen blocking agent alone in similar patients as reported in the scientific literature. In Stage 2 of the Phase 3 study, we plan to enroll approximately 200 subjects in a multi center open label randomized 1 to 1 active control clinical study to evaluate the efficacy and safety of the Novusarm with and without abemaciclib therapy depending on the outcome of the stage 1 First is an alternative antigen blocking agent in subjects with AR positive HER2 negative like breast cancer will progress while receiving a CDK4six Inhibitor plus an estrogen blocking agent, again, first line. The primary endpoint for the Stage 2 of the Phase 3 study is progression free survival. Our current plan is to have the Phase 3 Stage 1 clinical results by late 2024 or early 2025.

Speaker 2

Inovisarm monotherapy or bemaciclib plus Inovisarm combination therapy compared to an estrogen blocking agent, which is the active control, Demonstrates significant improvement in ORR, which is considered a surrogate endpoint for clinical benefit, then the company plans to meet with the FDA to consider an The approval regulatory pathway based on the clinical data from the Stage 1 portion of the Phase 3 study, whereas the Stage 2 portion of the Phase 3 clinical study will serve as the confirmatory study with progression free survival as the primary endpoint. In January of 2022, Veera entered into a clinical trial collaboration A supply agreement to which Eli Lilly supplies abemaciclib for the Enabler 2 Phase 3 clinical trial. Now let's turn to our viral ARDS infectious disease program. The company is developing cebizobulin 9 milligrams, which Both the host targeted antiviral and broad anti inflammatory properties as a 2 pronged approach to the treatment of hospitalized patients Viral lung infections at high risk for ARDS and death. The company has completed a positive Phase 2 and a positive Phase 3 COVID-nineteen clinical studies that have demonstrated that cebisabulin treatment resulted in significant mortality benefit in hospitalized moderate severe patients with COVID-nineteen viral lung infection and high risk ARDS.

Speaker 2

As viruses that cause lung infections and ARDS do so in a similar way. The company believes that cibizobulin has the potential to be a treatment for all types of viral induced lung infections, not only SARS CoV-two, but also influenza A or B, respiratory syncytial virus, also known as RSV, And other viruses in hospitalized patients on oxygen who are at high risk with ARDS. We plan to meet with the FDA in September to Expand the patient population of the agreed upon Phase 3 confirmatory COVID-nineteen study into a Phase 3 study to treat hospitalized adult patients who have any kind The way to think of it is COVID-nineteen represents one of many Respiratory viruses that cause lung infections and pneumonia that may progress ARDS and death for which we've already conducted Phase 3 study demonstrating mortality benefit with the bisibulin treatment. The Phase 3 was a double blind randomized placebo controlled study in 204 modest to severe COVID-nineteen patients and high risk for ARDS. The primary endpoint was a proportion of patients that died by day 60.

Speaker 2

And based on the planned interim analysis of the first 150 patients randomized, the independent data monitoring committee unanimously recommended that the study be stopped Clear evidence of clinical benefit and they identified no safety concerns. In the interim analysis, treatment with cebizobulin 9 milligrams once daily Resulted in a clinically meaningful and statistically significant 55.2% relative reduction in deaths compared to placebo. On May 10, 2022, the company had a pre emergency use authorization, EUA, meeting with the FDA to discuss the submission of an EUA application for On June 7, 2022, at the request of the FDA, the company submitted a request for FDA emergency On February 28, 2023, FDA notified the company that it had declined to grant the company's request for emergency use authorization. In communicating its decision, the FDA stated that despite the FDA declining to issue an EUA for subizobulin at this time, the FDA remains committed to working with the company in the development of sebizobulin. Separately, at the FDA's advisory committee meeting, The FDA statistical efficacy summary of our Phase 3 clinical study was presented in their Slide 88 of the FDA's presentation and was as follows.

Speaker 2

The study met the statistical criterion for stopping at the interim analysis. Data in all 204 subjects completing the study indicated Treatment benefits for all cause mortality at day 60 results robust missing data assumptions exploratory analysis indicate Minimal impact of baseline imbalances and timing of enrollment with duration of standard of care and there was a positive numerical trend consistent Across subgroups defined by age, baseline WHO category, region and standard of care use at baseline. On April 20 7, 2023, the company met with the FDA and reached agreement on the design of the Phase 3 confirmatory COVID-nineteen clinical trial to evaluate the vision and treatment of hospitalized moderate to severe COVID-nineteen patients who are at risk for ARDS and the path forward to submit a new EUA application and or an NDA. The FDA agreed to a confirmatory Phase 3 randomized 1 to 1 multi standard efficacy and safety study of sebizobulin 9 milligrams oral daily dose Plus standard of care versus placebo plus standard of care in 408 hospitalized adult patients with moderate to severe SARS CoV-two 2 infection with high risk ARDS. The indication, in other words, the patient population for cebizobulin will also be The primary endpoint All cause mortality at day 60.

Speaker 2

Secondary endpoints include days in the hospital, days in the ICU, days in mechanical ventilation And the proportion of patients alive without respiratory failure and an exploratory endpoint, which will be the presence of long COVID-nineteen symptoms at day 180. In order to get a potentially efficacious drug to patients in an efficient time frame, 2 planned interim efficacy analyses will be conducted. The first planned interim analysis is expected to occur when 204 patients, which is 50% of the population, has completed the Day 60 primary efficacy endpoint and the second planned interim analysis is expected to occur when 290 patients, that's 71% of the patient population, have completed the Day 60 primary efficacy endpoint. If either the interim efficacy analysis meets the statistical significance criteria, the trial could be stopped for efficacy. Should the pre specified primary efficacy endpoint analysis demonstrate statistically significant effect on all cars mortality favoring The company may consider a new request for an EUA or a submission of an NDA as the company would potentially have 2 adequate and well controlled trials for review.

Speaker 2

As the program has fast track designation, a rolling NDA submission is a possibility for cebizobulin. Now, cebisobulin does have activity against influenza A. So on April 4, 2023, the company announced results from Pulmonary inflammation mouse ARDS model and this was conducted by a team of researchers at LabCorp Early Development Laboratories in the United Kingdom. Sibizobulin treatment resulted in a statistically significant decrease in the total number of inflammatory cells and a reduction of Key cytokines and chemokines in lung fluid, clinically, sebibulin treatment resulted in a reduction in severity of lung inflammation by histo Pathology and a dose dependent improvement in lung function. As for our case, we expanded the indication to all Types of viral lung infections in ARDS.

Speaker 2

Well, viruses cause up to 1 third of community acquired pneumonia and viral infections can trigger the immune system to Release an overwhelming amount of inflammatory proteins known as a cytokine storm. Cytokine storm causes tissue damage in lungs that lead to ARDS And patients who develop ARDS have a high mortality rate. As ARDS results in the over exaggerated immune inflammatory response by patients to the virus infection Rather than by direct injury from the virus itself, an antiviral agent alone may not be effective. Cebizobulin is a host targeted antiviral and broad spectrum anti inflammatory agent has the potential to address the virus infection and the inflammation caused by the cytokine storm that causes ARDS multi organ failure and death. Now we're in the middle of a summer surge for COVID-nineteen and another one is expected in the fall and the winter.

Speaker 2

In the current endemic phase, COVID-nineteen infection is estimated to be the 4th Leading cause of death in the United States in 2023. ARDS remains a frequent serious complication of severe COVID-nineteen infection. It has been reported that up to 33% of hospitalized patients COVID-nineteen have ARDS, 75% to 92% of patients admitted to the intensive care unit with COVID-nineteen have ARDS. The mortality rate of COVID-nineteen associated ARDS It's 45%. And among the patients who die from COVID-nineteen, there's a 90% incidence of ARGS.

Speaker 2

As As the COVID-nineteen endemic continues, there's also need to remain vigilant and focus on preparedness for the next wave of infections involving New viral strains. COVID-nineteen will be a problem for the foreseeable future and there's a need for effective therapies, especially for these hospitalized patients With modest severe COVID-nineteen infection in highways with ARDS. Further, the influenza burden estimates according to the Center For disease control and prevention in the United States was up to 630,000 hospitalizations and up to 55,000 deaths in the past 9 months. RSV was responsible for 177,000 hospitalizations and 14,000 deaths among 65 years and older adults in the United States. Interestingly, the pathogenesis and the mortality rates for hospitalized Influenza and RSV adult patients who have viral lung infections and who develop ARDS are similar to the COVID-nineteen associated ARDS.

Speaker 2

Patients with viral lung infections who are on oxygen support and who are at risk with ARDS represent a high unmet need and a Potentially large market opportunity with very limited treatment options. Viral induced pneumonia and lung infection is the leading cause of hospitalization in the U. S. According to the American Thoracic Society. So although we have reached agreement with the FDA for the design of the Phase 3 confirmatory COVID-nineteen Clinical trial.

Speaker 2

We believe that given the changing COVID-nineteen landscape, the need for an agent like cebisabulin that has the potential to provide mortality benefit In all types of viral lung infections that could lead to ARDS and death and viral lung infections in ARDS is a serious unmet medical need. The company now plans to meet with the FDA again to reach agreement on design of the proposed expanded Phase 3 confirmatory study Evaluating cebesabulin 9 milligrams for the treatment of hospitalized adult patients who have viral lung infection on who had high risk ARDS and death regardless of the type of virus and to confirm that a completed that the completed Positive Phase 3 COVID study that we've already done and the proposed Phase 3 for all viral ARDS study Together, it will be sufficient to submit an NDA for the broader indication for the treatment of all hospitalized adult patients with viral lung infections on oxygen support and high risk The FDA has granted a meeting with Veru in September of 2023. We will provide an update on the viral lung infection ARDS program After we meet with FDA and have appropriate clarity on this proposed study. Now if we reach agreement with the FDA, we will not pursue the Phase Confirmatory COVID-nineteen only study or the influenza A or B only study.

Speaker 2

Now the clinical precedent that informed us That informed us of this potential change in the regulatory and clinical strategy was actually set by AstraZeneca. AstraZeneca has begun enrolling A Phase 3 efficacy and safety of tozorakimiv in hospitalized patients receiving standard of care for all types of viral lung The primary endpoint is the proportion of patients that die or progress to invasive mechanical ventilation by day 30. And tozorakimab is an anti inflammatory, anti IL33 antibody that inhibits the IL family of cytokines. Now interestingly, in hospitalized COVID-nineteen patients on supplemental oxygen, similar anti inflammatory antibody treatments Had an absolute reduction in mortality of less than 5%. So anakiniva, which is an IL-one antibody, had a less than 4.4% absolute reduction Tocilizumab, an IL-six antibody, had less than 4.2% absolute reduction in mortality.

Speaker 2

In our Phase 3 COVID-nineteen study, which included patients on mechanical ventilation, treatment with cebidabulin, a dual antiviral and broad anti inflammatory agent, resulted in a 20% absolute reduction in mortality. Now in April, we submitted a request to FDA SEDAR to reevaluate FDA's declination of our EUA for cebizipulin through formal dispute resolution process. The FDA denied our request for entry into the process. FJ stated That they're committed to working with us on subizumabulin, they have recommended we continue with our current clinical plan and to reach out to the FDA as Often as needed under Fast Track designation to support cebisiabulin's development. Interestingly, in another development, The Influenza and Emerging Infectious Disease Division of the Biomedical Advanced Research and Development Authority of the United States Department of Health With ARDS, BARDA states, This clinical trial will evaluate the safety and efficacy of novel, Threat agnostic and host directed therapeutics that can address ARDS caused by known and unknown health security threats such as pandemic influenza, COVID-nineteen, other emerging infectious diseases and chemical, biological, radiological and nuclear incidents.

Speaker 2

Veera was selected as one of the finalists and presented to Visibulin to BARDA as a novel threat agnostic and host directed therapeutic agent We've brought anti inflammatory and anti inflammatory activities in hospitalized adult patients at high risk ARDS. The ARDS Therapeutics pitch event was called Just Breathe, Was conducted at the end of July of 2023. We expect to be notified of a decision in early Q4 For 2023, BARDA plans to select up to 3 therapeutic candidates representing different mechanisms of action versus placebo for participation in the planned BARDA sponsored ARDS clinical study, which would consist of 200 subjects per arm. As you know, we're pursuing smallpox and Ebola virus, other viral infections that may also lead to ARDS and death and posing a global public health threat Society includes smallpox and Ebola virus. A single outbreak involving any one of these viruses would be an immediate global emergency with limited existing options for treatment.

Speaker 2

On April 11, 2023, VERU announced positive results from preclinical in vitro study Conducted by a team of researchers led by Doctor. Brian Ward, Associate Professor of Microbiology and Immunology, University, Rochester, New York. The preclinical study evaluated the effects of sebibulin against the prototypical pox virus called vaccinia virus, which demonstrated sebibulin prevented both the release of the pox virus From infected cells and the spread of the pox virus to healthy cells. Subducedez vousen as a host directed antiviral And broad anti inflammatory aging may be useful as a novel treatment not only against smallpox and other pox viruses, but also may reduce the hyper Reactive immune response triggered by pox virus is responsible for severe pneumonia, ARDS, multi organ failure and death. The company has a scheduled As you know, clinical human efficacy trials of drugs for preventing or treating smallpox virus is not feasible and you can't challenge Studies, these challenge studies, we actually try to give smallpox to healthy subjects, so that's unethical.

Speaker 2

Therefore, drugs for these indications Generally developed and approved under regulatory pathway commonly referred to as the animal rule. The FDA may grant marketing approval based on adequate and Well controlled animal efficacy studies when the results of those studies establish the drug is reasonably likely to produce clinical benefit in humans. Now I'd like to turn to our commercial business. The company sells FC2 in both the U. S.

Speaker 2

Commercial sector and in the public health sector in the United States And globally, as the only FDA approved female internal condom in the United States, FC2 is a well established And serious business. We have sold over 750,000,000 female condoms worldwide. And since 2017, FC2 has generated over $213,000,000 of net revenue. We have and we plan to continue to invest the profits from the FC2 business to help fund the clinical development of our drug candidates in Novusarm and cebisavulin. The telehealth channel has become an important commercial strategy In the United States for access to birth control products, especially for our product FC2, is a non hormonal and latex free option To prevent pregnancy and transmission of sexually transmitted infections.

Speaker 2

In a recent survey of 6,000 respondents conducted by the Kaiser Family Foundation, 82% of the respondents said that the COVID-nineteen pandemic was not, Not the reason they first accessed birth control online, which supports our strategy to provide contraceptive access Using the telehealth portal. In the same survey, almost 5% of women reported getting the FC2 Female Continuum is actually the number 3 most prescribed contraceptive behind pills and emergency contraception. As a point of reference, we believe this is good news About the potential commercial opportunity for FC2 in the United States contraceptive market, if 5% market share shown in this survey is able to be extrapolated to the Estimated $8,300,000,000 contraceptive market in 2022, with projections to grow at a compound annual rate Growth rate of approximately 5.1 percent, there is potentially a greater $400,000,000 market opportunity for FC2. Accordingly, to have more direct control over promotion and distribution to maximize U. S.

Speaker 2

Prescription sales of FC2, the company made a decision last year to launch its own independent FC2 dedicated direct to patient telehealth telecontraceptive portal. The company continues to invest in It grows its direct to patient telemedicine portal as well as adding new telehealth and Internet fulfillment pharmacy partners, so we can provide coverage All fifty states in the United States. Having taken the time to refine our marketing, drive operational improvements and enhance Patient experience during the initial launch phase, there are increasing new prescriptions being written and filled through our FC2 telehealth portal. During the Q3 of fiscal year 2023, we saw our new prescriptions grow over 115%, providing prescriptions to approximately 4,400 patients. We believe these results support our strategy And demonstrate high demand for FC2.

Speaker 2

We plan to continue to grow and deepen our investment in a profitable way by further expanding our presence both in social media channels Now in the U. S. Public sector, the company has seen 115% increase in volume there The Q3 fiscal year 2023 versus Q3 fiscal year 2022. The growth is attributable to key U. S.

Speaker 2

Public sector partnerships, including The company's recent announcement in April 2023 that it has entered into a purchasing agreement with Aifaxis Group Services, The number one provider of oral and emergency contraceptives in the U. S. Clinics. In the global public health sector outside the U. S, The company markets FC2 to entities, including ministries of health, government health agencies, U.

Speaker 2

N. Agencies, Not for profit agencies and commercial partners. We are currently supplying a large multiyear South African tender for female condoms, which is expected to continue until 2025 and we have seen sales grow in the current year as the current tender is launched. We also expect A formal Brazil tender process to commence later this year. Based on our experience to date, we expect revenue from our U.

Speaker 2

S. C2 prescription business will demonstrate robust growth both from our dedicated FC2 telehealth portal and for the addition of new telehealth and other commercial Furthermore, we intend to continue to leverage partnerships with entities in U. S. Public sector such as State Departments of Health, 501c3 Organizations Generate the strong unit sales growth we have seen in fiscal 2023 from this channel. Now the company had another FDA approved product called EntadV, Which is a product for new treatment for BPH that was approved by the FDA in December 2021.

Speaker 2

Product is part of the company's sexual health program. On April 19, 2023, the company entered into an asset Purchase agreement with Bluewater Vaccines to sell substantially all of the assets related to IntadVie. Transaction closed April 19, 2023 and The purchase price for the transaction was $20,000,000 plus $80,000,000 in future sales milestones. I will now turn the call over to Michelle Greco, CFO, COO to discuss the financial highlights. Michelle?

Speaker 4

Thank you, Doctor. Steiner. As Doctor. Steiner indicated, we have a lot of activity at Veru. Let's start our highlights with the 3rd quarter results for the 3 months ended June 30, 2023.

Speaker 4

Overall, net revenues were $3,300,000 compared to $9,600,000 in the prior year Q3. The prescription business net revenues decreased From $6,700,000 in the prior year Q3 to $863,000 The reduction in the prescription business net revenues is due to not having any revenues from the Pill Club in the current period due to the Pill Club's Chapter 11 bankruptcy filing. Global Public Sector net revenues were $2,500,000 compared to $2,900,000 in the prior year Q3. Gross profit was $1,200,000 or 37 percent of net revenues compared to $7,100,000 or 74 percent of net revenues in the prior year Q3. The reduction in gross profit and gross margin is driven primarily by the change in the sales mix With our U.

Speaker 4

S. FC2 prescription business representing 26% of net revenues in the current period compared to 70% in the prior period. Operating expenses for the quarter decreased to $13,800,000 from the prior year's quarter of $28,900,000 The decrease of $15,100,000 is primarily due to research and development costs, which decreased $15,200,000 to $2,900,000 compared to $18,100,000 in the prior year quarter and is offset by a small increase in selling, general Administrative expenses of approximately $100,000 from $10,800,000 to $10,900,000 in the current period. The decrease in research and development costs is primarily due to the company's recently announced updated strategy to refocus its Development efforts and drug candidates with the best opportunity to lead to long term success and to create value for the shareholder. On April 19, we sold our NTSP product to Bluewater Biotech for $20,000,000 We received $6,000,000 Closing and promissory notes of $4,000,000 payable by September 2023, dollars 5,000,000 payable by April 2024 and $5,000,000 payable by September 2024.

Speaker 4

In addition, there is the possibility of up to $80,000,000 in sales milestone payments. We recorded a $17,500,000 pre tax gain on the sale of Intanci. Operating income for the Quarter was $4,900,000 compared to an operating loss of $21,800,000 in the prior year quarter. The change of $26,700,000 is due to the pre tax gain on the sale of Intesi of $17,500,000 Plus the reduction in operating expenses of $15,100,000 offset by the reduction in the gross profit of $5,800,000 Non operating income was $1,500,000 compared to non operating expense of $234,000 in the prior year Q3 And primarily consisted of the change in the fair value of the derivative liabilities related to the synthetic royalty financing, partially offset by interest expense. The change of $1,700,000 is primarily due to a reduction in interest expense of $536,000 and an increase in the change in the fair value of the derivative liability of $908,000 For the quarter, we recorded a expense of $58,000 compared to $138,000 in the prior year Q3.

Speaker 4

The bottom line result for the Q3 Fiscal 2023 was net income of $6,300,000 or $0.07 per diluted common share compared to a net loss of $22,200,000 or $0.28 per diluted common share in the prior year Q3. Turning to the results for the 9 months ended June 30, 2023. For the 1st 9 months, total net revenues were $12,400,000 compared to $36,800,000 in the prior year period. Net revenues from the U. S.

Speaker 4

Prescription business were $5,200,000 compared to $29,900,000 in the prior year period, And net revenues from the Global Public Health Sector Business were $7,200,000 compared to $6,900,000 in the prior year period. The reduction in the U. S. Prescription business net revenues is primarily due to lower volume from telemedicine customers because of ongoing challenges, which included changes in strategy, the impact of rebranding and reduction in marketing spending and thereby resulting in a slowdown in orders during recent quarters and ultimately those customers discontinuing operations. Net revenues from the Pill Club were $3,900,000 in the current year period compared to $17,400,000 in the prior year period.

Speaker 4

We recorded a provision for credit losses for the net revenues during the current year period, which were included in the gross accounts receivable balance on June 30, 2023, due to the pill club's Chapter 11 bankruptcy filing. Net revenues from another prescription channel customer were $11,300,000 in the prior year period and 0 in the current year period, which we understand are due to inventory management after a reduction in orders from its most significant customer, which Discontinued its operations, thereby resulting in our customers ceasing orders. We're working to increase net revenues in future periods By growing awareness and driving demand through increased FC2 marketing efforts through our telehealth platform and through discussions with potential new distribution partners in the telehealth sector. The increase in FC2 net revenues in the global public health sector It's a result of shipments commencing for orders under the 2022 South Africa tender in the current year period as well as increases in the U. S.

Speaker 4

Public sector orders. Overall, gross profit was $6,000,000 or 48 percent of net revenues compared to $30,100,000 82% of net revenues in the prior year period. The decrease in gross profit and gross margin is due primarily to the change in sales mix With the U. S. Prescription business, which has a higher profit margin, comprising a smaller percentage of total net revenues and higher production cost per unit due to lower production volumes.

Speaker 4

Operating expenses increased by $25,000,000 to $93,600,000 compared to the prior year period's $68,600,000 The increase is primarily driven by selling, general and administrative costs, which increased by $16,400,000 to $41,300,000 from $24,900,000 in the prior year period. The increase in selling, general and administrative costs is due to commercialization costs of $12,900,000 related to preparations for the potential launch of sebizobulin for COVID-nineteen incurred during fiscal 2023 prior to the FDA's decision on our EUA application and an increase in share based compensation costs to $10,200,000 from $5,000,000 resulting from an increase in the number of unvested stock options for which we recognize expense over a 3 year period of time. Research and development expenses increased to $44,500,000 from $43,800,000 in prior year period. The increased research and development expenses in the second half of fiscal twenty twenty two and the first half of fiscal twenty twenty three We're mainly related to cebizobulin for COVID-nineteen in our emergency use authorization application. In the Q3 of fiscal 2023, Because of our updated drug development strategy, we have seen a decrease in research and development expenses.

Speaker 4

We recorded a provision for credit losses of 3 $900,000 during the period related to the total receivables due from the pill club because of the uncertainty of their financial condition. There was no such provision for credit losses in the prior period. During the period, we also recorded an impairment charge of $3,900,000 Related to in process research and development assets recorded for sebizobulin for prostate cancer and zuclomiphene based on our updated drug development strategy. There was no such impairment charge recorded in the prior period. During the period, we recorded a pre tax gain of 17 $500,000 on the sale of the Impella assets.

Speaker 4

The operating loss for the period was $70,100,000 compared to $38,600,000 in the prior year period. The increase of $31,600,000 is primarily due to increased selling, general and administrative expenses, The write off of the intangible assets, the recording of the credit loss provision for the Pill Club, all offset by the pretax gain on the sale of Intesi. Non operating income was $749,000 compared to non operating loss of $4,000,000 in the prior year period and primarily consisted of interest expense and the change in the fair value of the derivative liabilities related to synthetic royalty financing. The change of $4,700,000 is primarily due to reduction in interest expense of $1,300,000 And an increase in the change in the fair value of the derivative liability of $2,900,000 For the 9 month period, we recorded a tax benefit of $77,000 compared to a tax expense of $225,000 in the prior year period. The company has net operating loss carry forwards for U.

Speaker 4

S. Federal tax purposes of $112,700,000 With $29,700,000 expiring in years through 2042 $82,900,000 which can be carried forward indefinitely. Our U. K. Subsidiary has net operating loss carry forwards of $63,100,000 which did not expire.

Speaker 4

The bottom line result for the 1st 9 months of fiscal 2023 was a net loss of $69,300,000 or $0.83 per diluted common share compared to a net loss of $42,800,000 or $0.53 per diluted common share in the prior period. Now let's look at our balance sheet. As of June 30, 2023, our cash balance was $16,200,000 Our accounts receivable balance was $5,100,000 and our gross promissory notes receivable from the sale of NTATCP were $14,000,000 Our net working capital was $15,500,000 on June 30, 2023 compared to $63,300,000 on September 30, 2022. During the 9 months ended June 30, we used cash of $78,500,000 for operating activities compared with $26,600,000 for operating activities in the prior year period. On April 19, we entered into an asset purchase agreement to Seller and Taffy assets to Bluewater Biotech for $20,000,000 We received $6,000,000 at closing, dollars 4,000,000 payable by September 2023, dollars 5,000,000 payable by April 2024 and $5,000,000 payable by September 2024.

Speaker 4

Plus, there is the possibility of up to $80,000,000 in sales milestone payments. On May 2, we entered into a common Stock purchase agreement with Lincoln Park Capital Fund LLC, which provides the company with the right, but not the obligation to sell to Lincoln Park Up to $100,000,000 of shares of the company's stock over a 36 month time period. On May 12, 2023, We entered into an open market sales agreement with Jefferies LLC, a sales agent, which provides the company the opportunity to issue and sell through Jefferies Shares of our common stock with an aggregate value of up to $75,000,000 We are not obligated to sell any shares of common stock under the Jefferies sales agreement. Jefferies will use commercially reasonable efforts consistent with its normal trading and sales practices To sell shares with Comstock from time to time based upon our instructions, including any price, time or size limit specified by us. On July 24, 2023, we had a special meeting in which the company's shareholders approved an increase and the number of authorized shares of common stock from 154,000,000 to 308,000,000 We are working to increase the future FC2 net revenues in the U.

Speaker 4

S. Prescription channel to drive growing awareness and driving demand of FC2 Through increased marketing efforts for our own telehealth platform and pursuing additional distributors in the telehealth sector. We have started to see an increase in the U. S. Public sector is a result of new distribution agreements executed within the last year and are starting to see increases in our global public sector business Over the years, we have had plenty of experience in managing our cash burn, and one of the effective tools we have, if needed, Is to slow down the drug development or focus on 1 drug program at a time to try to match drug development spend with available resources.

Speaker 4

We believe the current cash balance, along with the revenue from sales of FC2, cash payments we'll receive from the sale of our NTAP B assets and our ability to secure financing will be adequate to fund the planned operations of the company for the next 12 months as we continue to focus on developing novel medicines for the treatment of metastatic breast cancer and for viral induced acute respiratory distress syndrome diseases. Now I'd like to turn the call back to Doctor. Steiner. Doctor. Steiner?

Speaker 2

Thank you, Michelle. So the key takeaways from this past quarter are we have focused on We've received FDA clarity for the Phase 3 ENABLATE II study evaluating Inovisarm monotherapy, Inovisarm plus abemacyclic combination therapy versus estrogen blocking agent active to control, a second line treatment for hormone receptor Virtu negative breast amazite breast cancer. If the Stage 1 portion of the Phase 3 demonstrates significant improvement in ORR, the primary endpoint By either in OBOSARM alone or in combination with the bemozyme, we will meet with the FDA for potential accelerated approval Pathway. We will also quickly initiate the Stage 2 confirmatory portion of the Phase 3 study, progression free survival as the primary endpoint. So remember, Novusarm is a new and different hormone agent that targets the androgen receptor to suppress metastatic breast cancer with potential improvements And quality of life without the unwanted masculinizing effects and increase in the amount of care typically associated with androgens.

Speaker 2

Given the current COVID-nineteen landscape and the large unmet medical need to have a treatment available with a potential Mortality benefit against all types of viral induced ARDS, the company will meet with the FDA in September to gain agreement to Expand the evaluation of sebazipull and beyond COVID-nineteen into Phase 3 confirmatory study that would include all types of viral induced lung infections, influenza, RSV, COVID-nineteen and other viruses in hospitalized patients requiring supplemental oxygen who are at risk for ARDS. This expanded Phase 3 study would help us with more certainty in the timing of patient enrollment and offers a larger market opportunity. The Influenza Emerging Infectious Disease Division of BARDA is planning a large Multi center placebo controlled clinical trial to evaluate the safety and efficacy of 3 novel threat agnostic and host directed therapeutics in hospitalized Adult patients with ARDS. VERU was selected as one of the finalists, and we expect to be notified of the decision during the calendar Q4 2023. Companies reported positive preclinical data for cebizobulin influenza A induced ARDS and for pox virus.

Speaker 2

An FDA pre IND meeting for smallpox virus is scheduled for August of 2023. Our financial position, we have We reduced expenses after we received the COVID-nineteen UA declination. The company's cash burn During this quarter was $7,300,000 a $16,100,000 reduction compared to the prior quarter. Our cash position in fiscal year Q3 2023 was $16,000,000 plus we expect $14,000,000 In the gross promissory notes receivable for the sale of Intesi for fiscal year 2023 2024, so that's you add that together, you get a 30,000,000 And plus, we expect to continue to receive cash contributions from our FC2 Commercial Sexual Health Business. Vero has also entered into a common stock purchase agreement for purchase up to $100,000,000 with Lincoln Park Capital Fund.

Speaker 2

Under the terms of the agreement, Lincoln Park is committed to purchase up to $100,000,000 of Veru's common stock at the sole discretion of Veru From time to time over 36 months, we believe this commitment further enhances our financial flexibility and are aligned with long term strategy for our shareholder value Finally, we're actively seeking, in some cases, already in discussions for potential partnerships with Innovus Arm in breast cancer With that, I'll now open the call to questions. Operator?

Operator

To ensure the best sound quality. Our first question comes from Dennis Ding with Jefferies. Please go ahead. Hi, good morning. This is Anthea on for Dennis.

Operator

Congratulations on all the progress. Two questions from us, if I may. First one on cash, how much flexibility do you have on OpEx To potentially extend the runway beyond your guidance of 12 months. And second, on breast cancer, Can you comment on the status of Doctor. TESS MONO trial and if we will see data from that?

Operator

Thank you.

Speaker 2

So the question about cash, I'm going to ask Michelle to answer. So Michelle, can you answer that question please?

Speaker 4

Sure. The question beyond a 12 month runway, the answer is no different What I said for currently, right now, based on cash, based on all the changes we're making with the FC2 And the improvements we're seeing with the FC2 portal, the increases we're seeing in our U. S. Public sector space, Also on our global public sector space for the SD2 product, coupled with the fact that we have payments due from the sale of the NTAD fee, We continue to flex our operating expenses. We continue to look in ways to make improvements.

Speaker 4

And so again, I don't see any issue as we look out beyond the 12 month time period.

Speaker 2

Thank you, Michelle. I just want to add to that. So again, we're very excited about this base business. The base sexual health business has continued to be there for us. I To refresh everybody's memory, we had a peak year of $60,000,000 then went to $34,000,000 and prior to that it was 30 something, dollars 45,000,000 And then $37,000,000 $18,000,000 it generates real money.

Speaker 2

And that's been our success, so that we don't dilute our shareholders. And I'm a big shareholder and as a result, I'm very, very sensitive to dilution. For that reason, we have found I mean, the Internet In an incredible way, I mean, that growth of our business happened not yes, we got business from Global Public Sector, yes, we got more business in U. S. Public Sector, but really it's the U.

Speaker 2

S. Prescription business, Affordable Care Act and the Growing demand for non hormonal birth control that women have control over. So, we just happen to be at the right business at the right time. And so we based on our numbers, numbers are going to go up. And so we see 2024 being a better year.

Speaker 2

I mean, we're good for the next 12 months, but 2024, we're the latter part of 2024, as you move into 2025, I mean, the portal should be doing a pretty good job at helping the FC2 portal should do a pretty good job in helping us With cash for us to continue to develop our 2 main Phase 3 programs. As it relates to your second question, which is about our test. So just to be clear, our test is Enobasan monotherapy in a What is a later line patient population than enabler 2? Later line means they failed a CDK4six inhibitor and at least 2 Estrogen blocking agents and what we found is in some cases they were on 4 or 5 or more. There's approximately 50 patients That enrolled in that monotherapy study and there's patients still on the study as we speak.

Speaker 2

And so, in order for us to report data, we need to have the completed clinical study report. And so once we get this Clinical study before we have access to the data, then yes, we're going to look at that data very, very carefully to make sure that we can make some conclusions About Inobasone monotherapy in a much later stage patient population, but we're encouraged. And so we're looking forward to seeing that to report that.

Operator

Got it. Thank you.

Speaker 2

Thank you.

Operator

Our next question comes from Yi Chen with H. C. Wainwright. Please go ahead.

Speaker 5

Hey, everyone. This is Chetan on behalf of Yi Chen. The first question on Enabler, Do you anticipate a certain range, a minimum range of overall response rate That you would like to see from the Stage 1 portion of the study in order to receive an accelerated approval. I know it's a hypothetical. No, it's a

Speaker 2

good question. Yes, it's a good. So as long as we say hypothetical, I'm happy to say hypothetical. So The question basically is what do we think our ORR rates could be? And So if you look at the 5 arms, then you start with the active, again, this is based on the literature.

Speaker 2

If you have this second patient the second line patient population, patient population is filled with CDK4six inhibitor and an estrogen blocking agent, The expectation for the estrogen active control is going to be around 4%, 4% to 5% ORR, okay? And that is actually based On the most recent study that came out with the SERD elacestrant And I looked at their control group because elacestrant was given their active control where patients had failed CDK4six inhibitor and estrogen blocking agent and we're given the alternative estrogen blocking agent, the ORR is about 4 So that's probably the most recent large study that we can point our finger to to say that's 4%. As it relates with abemaciclib in combination with Inovusarm, bemecyclov alone is around 9% and that's in a population is Probably not exactly like this one, but close. And so 9% by itself, but we don't have a bema by itself. We have a bema plus a novosarm.

Speaker 2

So our expectation is that bema plus Inovusarm can be pretty interesting considering we've got our first three patients If 2 partial responses in a stable disease and we're just getting started. So, our is going to be much, much higher than the active control. And then when you look at Enobusarm by itself, Well, we have to go back to the Phase 2 study that was done in patients where only 10% to 12% were on a CDK4six This is 136 women and the basis for why we didn't license the product. And when you look at Tumor responses, whether it's reader 1 or reader 2, it doesn't matter, just looking for objective tumor responses. I mean, we were in the 30 Plus percent depending on how you cut the data.

Speaker 2

So it was always so when you look at 37% versus 4%, it looks pretty good. And that's monotherapy. So we think we're going to be in that range. So 4% for active control, Bevaciclib and Novosarm monotherapy can be pretty much neck to neck. And so if that happens, Again, I'm just thinking ahead.

Speaker 2

Novosarm by itself is a very well tolerated medicine. It builds muscle, builds bone, improves quality of life and with abemaciclib is a very good medicine in combination with Novozarm, but abemaciclib has Issues with GI and neutropenia. It's more like a chemo. So if we were able to have the combination and it's a high number, we'll go with it. If we have this combination And it's similar to Novoson monotherapy.

Speaker 2

We may just pick a Novoson monotherapy and go forward with it because of the safety and quality of life. So we have all this is hypothetical, but this is how we're thinking about it from a standpoint of how we set up the study.

Speaker 5

Excellent. Thank you so much. And lastly, I'm sorry if I missed this during your prepared remarks, but Could you provide FC2's prescription revenue for the quarter, please? Thank you.

Speaker 2

What's the question? Prescriptions for the FC2 prescriptions for the quarter? Yes. So I just said 4,400.

Speaker 5

Got you. Thank you so much.

Speaker 2

Sure thing. And 4,400, and the yes, so that's pretty good. That's I'm very happy with that because that means we're on that slope going up and we get a Good price for that. Okay. Next question please.

Operator

Our next question comes from Leland Gershell with Oppenheimer. Please go ahead.

Speaker 3

Hey Mitch. Thanks for The update. I want to ask a couple of questions with respect to Enabler 2, just to understand. So since those three Initial patients as you were evaluating the combination, have you been enrolling additional patients or have you are you now just

Speaker 2

Yes. So it's a good question. So this is what happened. We got the results. We had pre planned Three patients to be in, call it, stage 1a, which was the first time we would look at the combination of the bime cycle with the Novus arm to make sure There's no drug drug interactions with the PK.

Speaker 2

So we picked the Inovisarm 9 milligrams because that's what we did in the Phase 2 study as monotherapy And we took the bime cycle to the approved dose. And you put them together and you have 3 patients that come in with the second line And we got the data back and shows there's no drug drug interactions, no new safety issues. And we basically show even in the first scan, we showed 2 partial responses. The first 8 week scan, we showed 2 partial responses in stable disease. And so we went to the FDA to get more clarity and the FDA came back and said, you know, don't go higher, 9 looks Good, basically.

Speaker 2

Don't go higher, deny, but we're very interested in dose optimization. For registration program, they want you to have dose optimization sorted out. And we picked our dose was based on 9 milligrams and 18 milligrams that was done in the Phase 2. So they said go lower. And so we're going to 3 milligrams in combination with Innovusarm, 1 milligrams in combination And that will allow the agency to understand and then the NovoSparm monotherapy that will allow anybody to look at the bema and the NovoSparm Novosarm monotherapy and Abema in combination and you can tease out what the Novosarm is doing, what Abema is doing, because you have a monotherapy.

Speaker 2

So all that took a little bit of time to get sorted out. At least a couple of meetings with the FDA, comments back from the actually 3 sets of comments And we wanted to make sure we did it right. And so where we are now is enrollment will pick up again next Quarter when the 1 milligram and the 3 milligram Innovisarm clinical supply is ready. So that's what we're waiting on.

Speaker 3

Okay, understood. And just with respect to the public side of the FC2, could you comment if you have additional payments on the South African tender and also what you may see as the potential value of the Brazil tender? Thanks.

Speaker 2

Yes. So, Michelle is actually the expert and so I'm going to have her comment on that. But she's going to tell you how to think about the tender In general and how much we can expect from the South African one. And then she'll tell you historically what has happened in Brazil. Michelle?

Speaker 4

Sure. The South Africa tender just started. We won a significant portion And so the sales have just started. It's a 3 year tender process, so a 3 year tender. So we have a lot of We have multiple distributors in South Africa that continue to supply product there.

Speaker 4

Brazil, Normally, takes a little bit of a break between tenders and the new tender and partially due to the change in government as well. The new tender is going to be coming out towards the end of this calendar year And their tender normally is in the area of 20,000,000 to 50,000,000 units. It all depends on the government and how much they put out for bid. In most instances, they put a A portion of the tender that is for non latex and we fall into that category. So, we get an opportunity to bid on And That normally lasts about 18 months to supply that.

Speaker 4

And so like I said, the tender process should be announced The end of this year, once it's awarded and we start distributing, that will be in our into our next fiscal year into the second half of that year. The South Africa tender is going to continue though, all of next year and the following year as well.

Speaker 2

Yes. And the expectation that it will continue after that, it's been going on for 20 years. So it's going to keep going. It's just that you just put new ones out or to extend the current one. So in summary, the way to think of it is, we've got a U.

Speaker 2

S.-based business that's growing and it's palpable and we're seeing it and it feels Prescription business and that's our largest profit margin. The 2nd largest profit margin is U. S. Public Sector. That went up 115%.

Speaker 2

Big departments of health that have not ordered in the past have started ordering again and then we picked up some new business 540Bs and that kind of stuff. It feels good. So our 2nd biggest profit margin. And then all of a sudden, I attribute it to COVID. With COVID, everybody was using their dollars to go after vaccines and masks and all that stuff.

Speaker 2

Now that that's kind of passed And people are kind of getting to the new normal. Resources are being freed up and that's why I think we're seeing people going back to because Very clear, the number one reason public health is using the FC2 condom is probably more in line with The ability to stop sexually transmitted diseases than it is for birth control. And that's probably true for sure in Brazil and South Africa And USAID, which is a big organization that we work with, just the name tells you that it's primarily sexually transmitted diseases.

Operator

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference call back over to Doctor. Mitchell Steiner for any closing remarks.

Speaker 2

Thank you, operator. I appreciate everybody joining us on today's call. I look

Operator

The digital replay of this conference call will be available beginning approximately noon Eastern Time today, August 10 by dialing 1877344 7,529 in the U. S. And 1-four twelve-three seventeen-eighty 88 internationally. You will be prompted to enter the replay access code, which will be Please record your name and company when joining. The conference call has now concluded.

Operator

Thank you for attending today's discussion. You may now disconnect.

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Earnings Conference Call
Veru Q3 2023
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