Veru Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2025

There are 9 speakers on the call.

Operator

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, sir.

Speaker 1

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 interactions, finances and development and product portfolio. Such forward looking statements are subject to known and unknown risks and uncertainties, and our actual results may differ significantly from those projected, suggested or included in any forward looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10 Q and 10 ks SEC filings

Speaker 2

as well as

Speaker 1

in our press releases from time to time. I would now like to turn the conference call over to Doctor. Mitchell Steiner, VeriVinc's Chairman, CEO and President.

Speaker 3

Good morning. With me on this morning's call are Doctor. Gary Barnett, the Chief Scientific Officer Michele Greco, Chief Financial Officer and Chief Administrative Officer Michael Purvis, General Counsel and Executive Vice President of Corporate Strategy and Sam Fish, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our Q2 fiscal year twenty twenty five earnings call. Vapiro is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases.

Speaker 3

Our drug development program consists of two clinical stage drug candidates, enobosarb and sebisibulin. Novosarb, an oral selective androgen receptor modulator, SARM, is being developed as a novel drug that makes GLP-one receptor agonist weight reduction more tissue selective by preserving lean mass muscle while causing greater fat loss in older patients who are overweight, who have obesity. Cebisibulin is an oral microtubule disruptor, is being developed as a broad anti inflammatory agent to reduce vascular plaque inflammation to slow the progression and promote the regression of atherosclerotic cardiovascular disease. This morning, we will focus our update only on our obesity program. As defined by FDA, obesity is a disease of excess body adiposity of fat.

Speaker 3

Therefore, the medical objective to treat obesity by weight reduction drug or drugs in combination should be to reduce excess body fat, not lean mass, in order to improve the mobility and mortality associated with obesity. GLP-one receptor agonists have been shown to produce significant weight loss in patients who are overweight, who have obesity. Unfortunately, the weight loss is tissue non selective with the indiscriminate loss of both fat and lean mass. Of the total weight loss, up to 50% of the total weight loss is attributable to lean mass. We must do a better job of getting rid of fat tissue only.

Speaker 3

Let's face it. No one wants to lose lean muscle mass. Most of this is common sense, but the beneficial consequences of increasing or maintaining muscle mass in an aging population are increased basal metabolism with sustainable weight management, better control of the blood glucose, better joint health, better increased strength, increased balance potential decreasing falls, increased bone mineral density potential decreasing non traumatic bone fractures and increases in the possibility of maintaining independence in an older population. With that objective, we are developing InnovusARM with an oral which is an oral novel SARM that has demonstrated in previous clinical studies improvements in body composition with tissue selective increases in lean mass and decreases in fat mass, improvements in both muscle strength and physical function, no masculinizing effects in women and neutral prostate effects in men. We conducted a Phase 2b multicenter double blind placebo controlled randomized dose finding qualities clinical study designed to evaluate the safety and efficacy of enovasarm three milligrams, enovasarm six milligrams or placebo as a treatment to augment fat loss and muscle loss in 168 older patients greater than equal to 60 years of age receiving semaglutide which is Wegovy for chronic weight management.

Speaker 3

Primary endpoint is percent change in baseline total lean body mass and the key secondary endpoints of percent change in baseline and total body fat mass, total body weight and physical functions measured by STIRRIFYM test at sixteen weeks. After completing the efficacy dose assessment portion of the Phase 2b quality clinical study, the patients continued into a Phase 2b extension maintenance trial, while patients have stopped treatment with semaglutide, but continue to take placebo, Inovasum three milligrams or Inovasum six milligrams in a blinded fashion for an additional twelve weeks. Phase 2b clinical trial will evaluate whether Inovasum can maintain muscle and prevent the fat regain that generally occurs after discontinuing a GLP receptor agonist. Purpose of the Phase 2b quality clinical trial is to select the dose of Inovasarm in combination with semaglutide and LIGOVI that best preserves lean mass or muscle and physical function after sixteen weeks of treatment to advance into the Phase three clinical program. The positive top line results, the Phase 2b quality clinical study demonstrated that Novosarm is a novel drug that when combined with GLP-one receptor agonist makes weight reduction more tissue selective for greater fat loss while preserving lean mass or muscle.

Speaker 3

Phase 2b quality study is the first human study to report the effects of a muscle preservation drug candidate on body composition and physical function in older patients who are receiving a GLP-one receptor agonist for weight reduction. The Phase 2b quality clinical study met its primary endpoint with a statistically significant and clinically meaningful benefit of a 71% preservation of total lean body mass in all patients receiving enovasan plus semaglutide versus placebo plus semaglutide in sixteen weeks, and that p value equals 0.002. Enovasan three milligrams plus semaglutide was the best dose with a greater than 99% mean relative reduction in the loss of lean mass and that p value is less than 0.001, meaning almost the entire weight loss was fat mass. The Inovosom six milligram plus semaglutide dose preserved lean mass, but was not any better than the enovasum three milligram plus semaglutide dose. This is not unexpected.

Speaker 3

This is similar to what we have seen in previous multiple ascending dose clinical studies. We believe that at a certain point, the targeted androgen receptor becomes oversaturated by drug. As for the secondary clinical endpoints, enovasom plus semaglutide treatment resulted in a dose dependent greater loss of fat mass compared to placebo plus semaglutide with the Inovasum six milligram dose having a 46% greater relative loss of fat mass compared to placebo plus semaglutide group of sixteen weeks and that p value is 0.014. Although Inovasar plus semaglutide significantly preserved lean mass, the additional loss of fat mass caused by Inovasar treatment was able to replace that lean mass preserved to allow a similar net mean weight loss measured by DEXA with semaglutide at sixteen weeks. Accordingly, with Inovasar treatment, the tissue composition of the total weight loss shifted to greater and more selective for fat loss.

Speaker 3

For the placebo of somatostatin group, the median percentage of total body weight loss was 32% for lean mass and estimated fat loss was 68%. In contrast, in the all Inoson plus semaglutide group, the total weight loss due to lean mass was only 9.4% and estimated fat loss was 90.6%. And in the Inoson three milligram plus semaglutide group, it was 0.9% lean mass and 99.1 estimated fat loss. Therefore, Inovoson plus semaglutide improved changes in body composition, resulting in more selective and greater loss of fat compared to subjects receiving placebo plus semaglutide. Now physical function was measured by the Stericline test.

Speaker 3

Stericline test is an activity of daily living as it measures muscle strength, balance and agility. Decline in performance measured by stair climb tests has been shown in older patients to predict a higher risk for mobility disabilities, gait difficulties, falls and bone fractures, hospitalizations and mortality. A responder's analysis was conducted using a greater than ten percent decline in Stericline power as a cutoff at sixteen weeks. A greater than 10% decline in Stericline power at sixteen weeks represents a seven to eight year loss of Stericline power function that occurs with aging and this is documented by Van Voorhe in 2019. In our study, the loss of lean mass matter as forty two point six percent of patients on placebo plus semaglutide group had at least a 10% decline in Stericline Stericline power physical function in sixteen weeks.

Speaker 3

Again, this is the first human study to demonstrate that older patients receiving GLP-one receptor agonist for weight loss are at a higher risk for accelerated loss of lean mass and with physical decline. The all Inova somatosplatin group had statistically significant and clinically meaningful fifty four point four percent relative reduction in a proportionate subjects that lost at least 10% stericline power compared to placebo somatosplatin group and that p value is 0.0049. In the Inovasum three milligram plus semaglutide group, there was a sixty two point four percent relative reduction in proportionate patients with at least a 10% decline in Stericline power from baseline versus placebo plus semaglutide group and that p value was 0.0066. In a six milligram plus semaglutide group, there was a forty six point two percent relative reduction in proportionate patients with at least a 10% decline in stericline power from baseline versus placebo plus semaglutide group, the p value is 0.0505. In conclusion, Innovus arm treatment on average preserved lean mass of muscle, which translated into a reduction in the proportion of patients who had a clinically significant decline in stericline physical function versus patients receiving semaglutide alone.

Speaker 3

In summary, NovoSon plus semaglutide improved changes in body composition, resulted in more selective and greater loss of adiposity of fat mass, while preserving lean mass and muscle and preserving physical function or stericline power compared to patients receiving placebo plus semaglutide alone. Inovasaram represents a novel drug that in combination with GLP-one receptor agonist containing therapy causes greater and more selective loss of fat mass, which is the goal for higher quality chronic weight management. Next, we will discuss several upcoming clinical and regulatory catalysts. Number one, results of the unblinded safety data for the Phase 2b quality study are expected this quarter. Safety data for the Phase 2b quality study remains blinded as the Phase two extension maintenance clinical study portion is still finishing up.

Speaker 3

It should be noted that the aggregate blinded safety data have not shown any significant differences compared to previous clinical studies of Inovasar and and was expected for GLP-one receptor agonist. Further, the independent data monitoring committee met 02/10/2025 to evaluate the unblinded safety data and they made the recommendation to continue the study as planned. Next catalyst is the Phase 2b extension maintenance study, efficacy and safety results are expected this quarter. As a reminder, after completing the efficacy dose finding portion of the Phase 2b quality clinical study, which evaluate the effects of an ozone body composition during the active weight loss. Participants continued into the Phase 2b trial and Phase 2b extension trial where all patients stopped treatment with semaglutide, but continued taking placebo, enovasiran three milligrams, enovasiran six milligrams monotherapy in a blinded fashion for twelve additional weeks.

Speaker 3

The Phase 2b extension clinical trial will evaluate whether enoblitron can maintain muscle and more importantly prevent fat regain that generally occurs after discontinuing GLP-one receptor agonist. The company plans to present the full clinical efficacy and safety data sets for the Phase 2b quality clinical study and the Phase 2b extension maintenance study in future scientific conferences and publications. The next catalyst is we expect regulatory clarity for the GLP-one receptor agonist and an ovacian combination Phase three clinical program following an end of Phase two FDA meeting, which is anticipated in Q3 twenty twenty five. As a Phase 2b quality clinical study is a positive study, we plan to request an end of Phase two meeting with FDA. During our previous pre IND FDA meeting, FDA provided general comments about the regulatory path forward for Inovosarm as a drug that improves body composition during chronic weight management, including input on Phase three clinical program design.

Speaker 3

On the basis of this FDA input, we plan to propose a Phase three clinical program that is similar to the positive already positive Phase 2b quality trial. The proposed Phase three clinical trial design is a double blind placebo controlled study in older patients greater than or equal to the age of 60 who have obesity or overweight and who are eligible for treatment of GLP-one receptor agonist. The GLP receptor agonist may be either Wegovy, which is semaglutide and or Zepbound to zepatide. Patients will be randomized to oral daily Novosarm or matching placebo. All subjects will start and receive the GLP-one receptor agonist during the study.

Speaker 3

The proposed primary endpoint will be the effect of Novosarm and physical function measured by Stericline tests at twenty four weeks. Proposed key secondary endpoints will be to assess the effect of an ozone on total lean mass, total fat mass, Homo IR, which is insulin resistance and hemoglobin A1c at twenty four weeks. After the Phase three clinical trial ends at twenty four weeks of treatment, the plan is to continue to measure total lean mass, total body weight, stair climb test, total fat mass, bone mineral density, HOMO IR as I mentioned is insulin resistance and hemoglobin A1c for up to sixty eight weeks to capture the longer term benefits composition with greater loss of adiposity of fat preservation of both lean mass and bone for chronic weight management. Another catalyst is we have a novel modified release oral Novosarm formulation, which is on track to be available for the Phase III clinical studies and commercialization. Veru is currently developing novel, patentable, modified release oral formulation for Inovuzarm.

Speaker 3

The actual formulation pharmacokinetic release profiles and method of manufacturing will be subjects of future patents. If issued, the expiry for the new modified release oral Inovazar formulation patent is expected to be in 02/1945. The new Inoson formulation has completed animal trials and is anticipated to be in Phase one bioavailability clinical trials during the first half of calendar twenty twenty five. Again, the expectation is that this novel modified release oral enovasome formulation will be available for Phase three clinical studies and for commercialization. Finally, we are focusing our Phase three clinical program on the older patient population that could benefit from weight reduction drug for chronic weight management because they're at higher risk for muscle weakness and falls because of age related loss of muscle.

Speaker 3

Obesity prevalence is forty one point five percent among forty seven point four million patients enrolled in Medicare Part D plans, up to thirty four point four percent of patients over the age of 60 with obesity in The United States has sarcopenic obesity. Sarcopenic obese patients are patients who have obesity and low muscle mass at the same time and are potentially at the greatest risk for developing critically low muscle mass when taking a currently approved GLP-one receptor agonist. Now although older patients represent a large market population alone, success in this population can be a segue into the combination of Inovasar and GLP-one receptor agonist treatment in younger patients who have obesity as well as diabetic and the frailty populations. I will now turn the call over to Michele Greco, our CFO and CAO to discuss the financial highlights. Michele?

Speaker 4

Thank you, Doctor. Steiner. Let's review the results for the three months ended 03/31/2025. Research and development costs increased to $3,900,000 from $3,000,000 in the prior quarter. The increase is due to expenses related to the company's Innovus Arm Phase 2b quality clinical study for higher quality weight loss.

Speaker 4

Selling, general and administrative expenses were $5,200,000 compared to $5,900,000 in the prior quarter. The decrease is primarily due to a decrease in share based compensation. We recognized a gain on sale of NTAPI assets of $974,000 while there was none in the prior quarter. The gain represents non refundable consideration received related to promissory notes due to VERU. The bottom line results for continuing operations was a net loss of $7,900,000 or $05 per diluted common share compared to a net loss of $8,700,000 or $06 per diluted common share in the prior year's quarter.

Speaker 4

Net loss from discontinued operations net of taxes related to the FC2 Female Condom business, which was sold on 12/30/2024 was $49,000 or $00 per diluted common share compared to a net loss of $1,300,000 or $01 per diluted common share in the prior quarter. The net loss from discontinued operations during the current quarter represents changes in an estimate made at the time of the FC2 business sale, while the net loss for the prior year quarter represents the operations of the FC2 business during that period. Now turning to the results for the six months ended 03/31/2025. Research and development costs increased to $9,600,000 from $4,600,000 in the prior period. The increase is due to $6,400,000 in expenses related to the company's Innovus Arm Phase 2b quality clinical study for high quality weight loss during the six months.

Speaker 4

Selling, general and administrative expenses were $10,400,000 compared to $12,600,000 in the prior period. The decrease is primarily due to decrease in share based compensation. We recognized a gain on sale of NTAPI assets of $1,700,000 compared to a gain of $918,000 in the prior period, which is based on non refundable consideration received related to promissory notes due to VERU. In conjunction with the sale of the FC2 female condom business, we recorded a gain on extinguishment of debt of $8,600,000 related to the termination of the SWK residual royalty agreement. This represents the difference between the change of control payment of $4,200,000 and the net carrying amount of the extinguished debt of $12,800,000 which included an embedded derivative for the change of control provision at fair value of $4,700,000 The bottom line results for continuing operations was a net loss of $9,600,000 or $07 per diluted common share compared to a net loss of $16,400,000 or $0.13 per diluted common share in the prior period.

Speaker 4

Net loss from discontinued operations net of taxes related to the FC2 business was $7,200,000 or $05 per diluted common share, including the $4,200,000 loss on sale of the FC2 business compared to a net loss of $1,900,000 or $02 per diluted common share in the prior period. The increase in the net loss from discontinued operations of $5,300,000 is due to the loss on the sale of the FC2 female condom business of $4,200,000 and the increase in the loss from the change in fair value of derivative liabilities of $3,100,000 partially offset by a decrease in selling, general and administrative expenses of $2,200,000 The purchase price for the sale of the FC2 business was $18,000,000 in cash, subject to adjustments as set forth in the purchase agreement for the transaction. Net proceeds from the sale of the FC2 female condom business were approximately $16,300,000 after selling costs and other purchase price adjustments, but before a change of control payment of $4,200,000 owed to SWK pursuant to a residual royalty agreement for 2018 financing transaction. The loss on the sale of the FC2 female condom business is approximately $4,200,000 The difference between the estimated net proceeds of $16,300,000 and the total carrying value of the FC2 business of $20,600,000 The sale of the FC2 female condom business represented a change in strategy, allowing the company to focus all its efforts exclusively on drug development.

Speaker 4

Now looking at the balance sheet. As of 03/31/2025, our cash, cash equivalents and restricted cash balance was $20,000,000 compared to $24,900,000 as of 09/30/2024. The restricted cash balance as of 03/31/2025 was $354,000 related to the sale of the FC2 Female Condom business. Our net working capital was $15,800,000 on 03/31/2025, compared to $23,400,000 on 09/30/2024. The company is not profitable and has had negative cash flow from operations.

Speaker 4

We will need additional capital to support our drug development candidates. Based upon the company's current operating plan, our cash as of the issuance date of these financial statements is not sufficient for the company to fund operations for the next twelve months. However, we have sufficient capital to take the company into the fourth quarter of this calendar year, which is beyond the upcoming near term catalysts, which include the unblind safety data for the Phase 2b quality clinical trial, the top line efficacy and safety data for the Novosarm Phase extension maintenance study, the regulatory clarity from the FDA end of Phase two meeting for the Novosarm Phase three program and the Phase one bioavailability data for the novel modified release oral Novosarm formulation. During the six months ended 03/31/2025, we used cash of $19,100,000 for operating activities compared with $11,700,000 used for operating activities in the prior period. We generated cash from investing activities of $18,400,000 for the six months ended 03/31/2025, while we used $40,000 in investing activities in the prior period.

Speaker 4

The cash generated in the current year relates to proceeds from the sale of VAPS C2 female condom business of $16,300,000 proceeds of $1,700,000 from the sale of the INTAPI assets and proceeds of $393,000 from the sale of Onkinetics equity securities. We used cash and financing activities for the six months ended 03/31/2025 of $4,200,000 related to the change of control payments pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 female condom business. In the prior period, we generated $36,800,000 from financing activities. Now I'd like to turn the call back to Doctor. Steiner.

Speaker 4

Doctor. Steiner?

Speaker 3

Thank you, Michelle. And with that, I'll now open the call to questions. Operator?

Operator

Thank you. And your first question today will come from Dennis Ding with Jefferies. Please go ahead.

Speaker 5

Good morning. This is Anthea on for Dennis. Thank you for taking our questions. Could you talk a little bit more about how you're thinking about your cash balance and runway specifically what options are exploring to fund the Phase three and is there potential to partner out the program? Thank you.

Speaker 3

Yes. Thank you for the question. So hopefully you heard loud and clear that we have enough cash to last us into the fourth quarter, calendar quarter. That gives us plenty of time to get through these catalysts. Part of what we're trying to do is to get the full appreciation and value understood by investors and others based on the clinical data and other information that's coming out.

Speaker 3

So very so as I mentioned, so we're expecting this quarter to have the unblinded safety data for the Phase 2b quality clinical study, the top line efficacy and safety data for the Innovus Arm extension study will come out this quarter as well. Q3, we have regulatory clarity because that's when we'll have to meeting with the FDA on the Phase three program. Remember that dictates how much money, how big the study is. So it's kind of premature to say how much cash we're going to need for the clinical study until we know exactly what the FDA agrees to. We have an idea, but again, we need to get clarity.

Speaker 3

And so that will help dictate how we're thinking and what to do. And then we're expecting Phase one bioavailability bridging data, if you will, for the novel modified release oral NovaSARM formulation. So these are all value generating opportunities. With that said, yes, I think the approach should be to go for non dilutive funding and non dilutive funding would be best from either a partnership type act, partnership with that or more from a large pharmaceutical company of which we are in active discussions. And the reason we're in active discussions is because we have Phase 2b data that uniformly have we've been told by key opinion leaders, we've been told by the scientific advisory board, We've been told by every expert in the field that this is a game changer to be able to have a drug that will make a GLP-one burn only fat, that's unheard of.

Speaker 3

And so we are the first company to report on GLP-one in combination with the muscle preservation drug that's an oral drug. And being an oral drug and being a non peptide, meaning a small molecule has has some very interesting potential. And the way I see it, the future of weight loss and chronic weight management is going to be a journey in which you lose fat only and you hold on to lean. And furthermore, it's going to be an oral space. It's going to be an oral drug that you take for weight loss, it will be an oral drug you take for body composition and you can do it and especially the small molecules, can pair them together as a fixed combination.

Speaker 3

This could be very, very interesting. This is where the field is going. So as we get more and more information, I think that will solidify clearly that we're ahead of the pack. I think the myostatin inhibitors, even if everything is equal, the IV or subcu and that's what they're trying to move away from. So our strategy is to get the milestones behind us, to keep the discussions with the pharmaceutical companies going and to have more clarity on the Phase three program and that will help us understand better how what's the best way to fund the Phase three.

Speaker 3

You for the Got Thank you.

Operator

Your next question today will come from Gary Nachman with Raymond James. Please go ahead.

Speaker 6

All right. Thanks for all the updates and good morning.

Speaker 7

Good morning.

Speaker 6

So Mitch, for the Phase 2b extension maintenance study, review what outcomes would be considered a success in terms of the magnitude of benefit on weight loss and muscle mass for enobrutinib versus placebo after stopping the GLP-one. Does it need to be stat sig or just show a positive trend? And then if you could just say if the data is imminent or if it will be later in the quarter if you could narrow that at all? And then I have a follow-up.

Speaker 3

So okay, enough. So we're laughing. Do you want to know the exact timing of the date of release? And I'll see if I can give you some more clarity. So as you know, study is powered on the Phase 2b quality study, which is the formal first one hundred and sixty eight patients, sixteen weeks, lean body mass being the primary endpoint.

Speaker 3

So the way to think of the extension study is almost like a safety study. And what happens when you stop with GLP-one? So it will be more descriptive, but it's telling a real story about the working hypothesis that muscle is important. And so the idea so consider successful as we already know that we maintain lean mass with lenabasum and we burn more fat mass going into it. And we also know that the placebo group meaning semaglutide alone is acting just like you would expect semaglutide to act in other studies.

Speaker 3

So the STEP one study with semaglutide at sixty eight weeks, there was a 40% reduction in the there was for the total weight loss, 40% was lean and 60% was fat. We saw 32% lean and 68% fat at sixteen weeks. So the placebo group is acting just like we expect from the published New England Journal of Medicine article, Step one. So the expectation is that the placebo arm which now without semaglutide, without a Novos arm will act similarly, which we expect to see fat regain. Remember, fat is the enemy.

Speaker 3

We have to pause for a moment. When we deal with weight loss and obesity, it's all about what happens to fat going through the process, meaning that as fat comes back and you get fat regain, that's bad. So fat regain is what we're trying to blunt and with fat regain comes weight gain. And then the question of muscle, we're going to I guess because we're doing Andexxa, we're going to have a better clear understanding of what happens to muscle. Now if muscle comes back in the placebo group and you have fat regain, muscle I'm not worried about.

Speaker 3

I'm happy if muscle comes back, muscle doesn't come back, that's fine. The key thing to focus on is what happens to fat regain. How about a Novus arm? If you hold on to if you have a Novus arm and muscle is not depleted, meaning that you're not getting two signals to the brain. One signal in the brain is you stop at GLP-one, you're told to eat and you have a muscle depletion, you're told to eat, you get a double eat.

Speaker 3

And so you overeat. Lenovo sum shuts off one of those and the idea is that we will again focus on fat, blunt the fat regain. And I think a success would be if we can show that we blunted so much that in fact we may actually cause additional fat loss. Think about that for a moment. So if we cause additional fat loss and don't cause regain, and those on monotherapy could be a nice off ramp for patients who are for patients who want to stop with GLP-one for assorted reasons.

Speaker 3

Now to be very clear, the whole idea is to stay on GLP-one to get the benefit. And unfortunately, sixty percent of patients at year one come off with GLP-one and by year two, it's eighty percent for all kinds of reasons. And one of the main reasons they reach a weight loss that they're happy with and the problem they're having is they stop, they'll get all the fat back and they feel like they've lost it. So again, this is focused on the fat And if we can show a blunted fat regain, further loss of fat in an extension of twelve weeks that would be considered success. And the second question you asked, which is the timing, it will I will tell you the following.

Speaker 3

The safety data for the Phase 2b quality study will come out first this quarter. And then shortly after that, we expect to see the Phase 2b extension maintenance data come out and the safety and the efficacy will come out together.

Speaker 6

Okay. That's helpful. And then just in terms of the Phase three study, understanding that you still have to meet with FDA, what's your best guess on how big you think it will need to be? And are you leaning towards using the three milligram, six milligram or both doses? And also doing it just for older patients?

Speaker 6

And then just quickly any potential concerns with tariffs? So where is Inobasum sourced and manufactured if you can comment on that thinking ahead particularly for the modified formulation? Thanks.

Speaker 3

Yes. Gary will never answer the question about tariffs because he's got a better handle on how we're making the formulation where it's sourced. But to answer your first question, the expectation is that the primary endpoint for the trial will in older patients. We picked older patients because older patients have a different risk benefit. I think it's important because it's a call to action.

Speaker 3

And the risk benefit is that if patients have a decline in function, that actually means something. It means something in terms of balance, gate difficulties, mobility, disability, falls and fractures, mortality. I mean, you can dip into an entire literature. So that tells you kind of sets up nicely why physical function is important. With that said, the primary endpoint of your stair climb is twenty four weeks.

Speaker 3

If you do the power calculations, that ends up being about and then back up. I don't know whether you use three or six yet. It feels like three, but we got to get the full data set to see because three does a great job on lean, but six does a great job on fat, but three does a good job on fat too. So we're still debating that, but put that aside for a moment. There'll be one dose.

Speaker 3

So one dose will take forward. And so it will be one dose versus semaglutide plus or minus semaglutide and or tirzepatide. We're thinking now we'll probably do both. Why? Because there's only two drugs on the market right now GLP-1s that are commercial.

Speaker 3

And so it makes sense if we want to be using combination with either one, we should probably have data on both of them and stratify the Phase three, so that we pre specify that we're going to analyze the data with semaglutide group and to zepatide group separately. And I think that will be very helpful. All the rest of the companies, even though there's 120 companies working on this, on obesity products, right now tirzepatide and zemaglutide are way ahead. And so by the time our Phase three is completed, those are still going be the market leaders that we'll have to approach. So with that said, we believe that the numbers will be something like two hundred patients per arm.

Speaker 3

So total of approximately 400 patients randomized for the Phase three. Gary Barnett, you answer the question about tariffs and whether we have concerns about sourcing and that could potentially affect Innovus Arm price?

Speaker 7

Yes. We at this point, we don't foresee anything significant. Obviously, there potentially could be something come up. But the cost of goods of Innovus Arm is relatively low. So we believe we'll be in good shape regarding tariffs.

Speaker 6

Okay, great. Thanks a lot.

Operator

And your next question today will come from William Wood with B. Riley. Please go ahead.

Speaker 8

Thank you for taking our questions and congratulations on a very nice quarter and very promising results, definitely looking ahead to those. Maybe just wanted to tease out a bit more on what you might have seen already on safety. Understanding it's blinded to date, you did say that you haven't seen any significant differences compared to what you're expected or expecting based on the previous studies. So just to sort of help us out and set a bar, maybe you could provide some color on what your expectations are for the safety based on these prior studies and how we should be interpreting this in terms of just the general safety but maybe specifically on these liver tests?

Speaker 3

Yes. So I think maybe the best way to answer is to go head on with liver. And because people are saying that SARMs have from the literature SARMs in general, which data comes from the recreational use of SARMs at doses 10 to 20 times higher. So if we're at three milligrams, they're given dose of thirty milligrams, which is 10 times higher up to seventy five milligrams is up to 20 times higher. So go take an Advil and then next day take twenty one of them, see how you feel.

Speaker 3

So the problem is it's uncontrolled, don't know who's making it, it's made by Chinese, Indian companies. So even in that case, the real world data looks pretty good in terms of liver safety compared to, for example, alkylated anabolic androgens, which has also been abused in the past. I put abuse aside, from our clinical studies, which we have a database of about 1,600 patients. We saw a rate of ALT increase of about one point eight percent or something like that in the placebo group and about three point four percent or something like that in the Novosarm group. And that's like in five hundred patients per group.

Speaker 3

And what we see is very, very characteristic of what you see with the testosterone type product, not the alkylated testosterone that we modified to make it oral and it's been the problem. But if you take regular testosterone, we're probably more similar to that where you see slight increases, mild increases in ALT in a few subjects, always goes down either on drug, mostly almost always on drug unless the patient stops the study for some reason and it goes down to normal. We've never seen anything related to function, meaning bilirubin increases, alpha phosphatase increases, pro coagulation issues. So in other words, it's mild increases, self limiting comes back down and represents what's called adaptation of tolerance, which is a common mechanism that the liver handles some agents. The other thing about Novus Arm is we're not a we don't fit the two rule.

Speaker 3

Two rule looks at what dose technically it's called rule of two, in which if your dose is over one hundred milligrams raises concern, our dose is three milligrams. We don't fit that rule. So from that standpoint, our expectation is that what we're seeing is what we've been seeing before and it's acting the same way, mild increases comes back down, mostly usually on drug. And so we're not expecting as tolocin adaptation and it's not drug induced liver injury by Heisler, which is what people get into trouble with the drug development. We just have not seen that.

Speaker 3

And so I want to set the bar that in the aggregate, it's not like we saw something in the aggregate and now we're going to separate it out. We haven't seen anything in the aggregate that would be consistent with drug induced liver injury with by Hyde's law. I mean, Gary Barnett, do you want to add to that?

Speaker 7

Yes. I think you summarized it correctly and that's exactly what we've seen in previous studies. From a if you go away expand out of liver, we don't see any significant serious adverse events and we're not seeing that in this particular study either. So it's the safety in aggregate is consistent with the studies that we've conducted previously.

Speaker 3

One interesting thing is that GLP-1s also affect ALT, but same way, elevations have come down with time. And so the adaptation tolerance approach and then the widely used and that's true for tirzepatide and for semaglutide. So again, we're not seeing anything inconsistent with what we've seen before, which we've been saying. I think what will be different is when we provide the full data safety data set, you'll see what's happening in each category, semaglutide alone versus semaglutide plus three, plus six. Is that helpful?

Speaker 8

Very helpful. I appreciate that very extra detail there, Mitch. So just one more actually from us. It looks from everything sort of that we've presented so far, the FDA has sort of provided two paths towards two shots on goal or two paths towards regulatory improvement. You can sort of go after functional improvements or potentially go after metabolic improvements.

Speaker 8

It looks like you're sort of at least initially overwhelmingly targeting functional data obviously with your very nice positive stair climb also as your primary endpoint or in Phase three. I was curious though to how you're seeing sort of the other path, if you feel that that would be open to ANOVA's arm? Also, I don't think we've seen too much data on that. And so, how do you see sort of these two alternate paths towards regulatory improvement? And will we or what should we be expecting as far as sort of the metabolic tests from the Phase 2b quality coming up here shortly?

Speaker 3

Yes. So let me just so let me tell you how I'm seeing it from a standpoint of path. So the first thing to say, but let's talk about Novus Arm for a second. So Novus Arm has consistently shown lean body mass maintenance improvement populations and we've shown the same thing in this patient population. We've shown reductions in fat in other populations, older patients.

Speaker 3

Again, we've shown the same thing in this patient population. We have not seen the individual data with some of the metabolic parameters, with some of the metabolic parameters to look for are LDL, insulin resistance and HVA1C. We've seen in our previous studies, LDL is maintained or slightly lower, triglycerides go down, this was in novus arm and other populations. And we've also seen insulin resistance get better. So HOMO IR got better, HbA1c, I'm not quite sure on that one.

Speaker 3

But my guess is it got better, maybe Gary knows. In this study, we're measuring we're not measuring HOMO IR in the Phase 2b, but we are measuring HbA1c and LVL. And so from a metabolic standpoint, we're going to be additive, I believe, to what you see with the GLP-one. Now let's take a step back and what we do differently of course is we have in addition to muscle mass being metabolic, we also have muscle mass being physical function and that's been the hardest one for other drugs like myasthenia to show. And so and part of that is because the angio receptor is a time tested receptor.

Speaker 3

And we know all you have to is look at the real world literature, people, they maintain muscle, they burn fat, they improve their performance. And so it's a performance drug. There's no question about it, but FDA is asking it to be a performance drug. They're asking you to show function. So by definition, it's not just what you see on DEXA, it's what you see by performance.

Speaker 3

And we've seen that, whereas myostatin inhibitors in general have had a tough time. So I think we're oral. So I put us in a good position. Now the pathway from a regulatory standpoint, you have to think of it a couple of ways. The FDA has put out a guidance in January 2025 that was very interesting because the debate in the field is what is the regulatory pathway.

Speaker 3

And what you heard from others is that if you showed a 5% greater weight reduction, incremental weight reduction when you combine two drugs together, then that gets you over the hurdle. Based on everything I know, several meetings with the FDA, the FDA guidance itself and furthermore, workshops with the FDA, that's evolving. People are now understanding what the FDA meant was for the first time you have a drug for weight loss. 5% weight loss compared to placebo and standard of care or standard lifestyle changes is 5%. But once you're in and you have an approved drug, that's 10%, for example, loss, and you put that in combination with a second drug and you come back with fifteen percent, the agency doesn't know what that means.

Speaker 3

What did you do to make the patient better? So the agency says you have to have a second test. And that second test is what did you do that's clinically meaningful. So the FDA says clinically meaningful means HbA1c gets better, insulin resistance gets better, LDL gets better, for example, those are metabolic things that get better. In the case of ARC drug, the fact that we showed improvement in lean stabilized the technical stabilized preserved lean mass, we can show function.

Speaker 3

If you show benefit in function, that's a benefit clinically meaningful. But if you think about what the GLP-one is doing, the GLP-one treatment makes HbA1c better, makes insulin resistance better, makes LDL better. So the combination has to make better, better. Whereas in the situation within physical function, which is shown in our Phase 2b, the physical function is not better with a GLP-one. The GLP-one hundred forty two point six percent of all the patients in fact have a ten percent or greater decline in Stericline power.

Speaker 3

So we can make something worse better. That's interesting. Now pause for a moment. That means that the bar for it's high and low. It's low for the first time you have a product that's by itself.

Speaker 3

It's high if you give it in combination because you're being asked to do more than just weight loss. The FDA also has said in their guidance that there's a body composition pathway for approval. So body composition basically means fat and muscle and bone and that kind of stuff. They know there's a problem that GLP-1s that you change body composition and in fact the FDA has purposely gone out of the way to define obesity as excess adiposity. So weight reduction drug has to be drug that burns fat.

Speaker 3

Fat is what you get no points of losing lean. In fact, the FDA now mandates sponsors to do a DEXA or an MRI to quantify, at least in the subpopulation, how much lean is lost and how much fat is lost because the whole goal is to show fat loss. So with that so in that same guidance, they say, however, if your drug is a body composition drug, like in our case, we're preserving lean, then that path is beyond the scope of the weight reduction guidance because you're now a body composition drug in combination with GLP-one and come seek advice. Well, our pre IND was that advice. So when we had the pre IND meeting, the FDA made it very, very clear that in our case, we're fortunate because we do improve lean mass.

Speaker 3

DEXA scan of lean mass by itself is cosmetic, okay? So holding on the lean mass is wonderful, but what does it mean? And again, it's performance, it's function. And so performance and function has to be measured somehow. We did a stair climb test.

Speaker 3

And so now we have in our Phase 2b a great situation that if we replicate the Phase 2b in a Phase three setting, that's wonderful, then we win. So the primary endpoint is physical function by stair climb test at twenty four weeks and we show that we can stop the decline in physical activity, physical function by stair climb in patients on GLP-one, that's clinically meaningful on its own. So that is a very clear pathway forward with FDA consistent with the guidance and consistent with what they told us in our meetings with FDA.

Speaker 8

Appreciate that color. I'll hop back in the queue, but definitely on the lookout for the imminent data and congratulations again for a very nice quarter.

Speaker 3

Thank you.

Operator

And your next question today will come from Yi Chen with H. C. Wainwright. Please go ahead.

Speaker 2

Good morning. This is Eduardo on for Yi. Just a quick question again on the Phase three trial. You mentioned adding tirzepatide and I'm curious what your thoughts are there. There's some anecdotal evidence that tirzepatide skews a little bit more towards fat loss instead of lean mass.

Speaker 2

I'm curious how you're planning around that in your trial design potentially, if you're losing more less lean mass, you might need a little bit more patients in that group to power a difference. I'm curious how you're thinking about that

Speaker 3

Yes. So we have yes. So if you go back and look at the data, you'll see the following. To my surprise until I saw the data, tirzepatide loses about the same amount of muscle, lean mass as semaglutide. And the data comes from the STEP one study for semaglutide, where I think it's about 6.8 at sixty eight weeks, it was 6.8 kilograms of lean that's lost.

Speaker 3

And so remember, it's with the lean, not so much with the fat is, it's how much lean you're trying to preserve for function. And so 6.8. And if you go back and look at the tirzepatide data and you have to look in the supplemental tables, I was able to find the number at seventy two weeks. Remember seventy two weeks is because they have a different titration period and so it gets to seventy two weeks. It was about 6.2 kilograms.

Speaker 3

So the difference between the lean mass loss at approximately a year plus is similar. So I think that the functional issues tirzepatide is going to have, it would be pretty much similar to what we found with somatostatin. With that said, we're going to power the study based on those numbers and stratify the subjects based on whether on tirzepatide or somatostatin, we don't mix apples with oranges, if that makes sense. I think the apples are going look very much like oranges in this study, but to be purist, we'll keep them separate. Gary Barnett, do you want to add to that?

Speaker 7

No, that's right. There'll be stratification on which we'll make sure they're equal between the treatment groups. So that difference will wash out or will be accounted for in randomization. And of course, type of GLP-one that they'll be on will also be one of our covariates in the ANOVA in the final statistical analysis.

Speaker 3

Got it. Thanks a lot. It's really helpful. Thank you.

Operator

And your next question today will come from Leland Gershell with Oppenheimer. Please go ahead. Hey, good morning. Thanks for taking our question. Just wondering, Mitch, industry has been investing a fair bit in the development of potential therapies for the side effect of the GLP-1s vis a vis the myostatin blockers and so forth.

Operator

Wondering if in the work you've done to look at the differences between Enovo and perhaps those strategies, are there any concerns you may have that those may show any benefits that may supersede or be differentiated from ANNOVA as we await the remaining data from the Phase two? Thanks.

Speaker 3

Great question. So let's I'll begin with what I think makes us different and I'll end with what I think makes us different. What makes us different is oral and their IV or sub Q and the whole space is moving even if all things are equal, things are moving in the direction of oral treatments for chronic weight management. And all the GLP-one containing agents have a degree of lean mass loss. Nobody is going to disagree that older patients are at risk because they have less muscle mass to begin with.

Speaker 3

And it's not a percent thing, 25% of a small amount of muscle is still a big amount. And so the older patients, even big pharma will tell you are the ones that most at risk that we need to keep an eye on. With that said, I think the myostatin inhibitors are going to have to overcome a problem in their development, which has been showing physical function benefits and physical function benefits by objective measurements of muscle function. And I'm not talking about six minute walk test, because six minute walk test should get better if you lose weight because six minute walk test is cardiovascular. That's why they use six minute walk test for example for pulmonary artery hypertension drugs and that kind of stuff.

Speaker 3

But muscular dystrophy for example they use for muscle quality, they use Stericline and those kinds of tests. So I'm not think the challenge is I think they're going to show a greater loss of fat. I think they're going to show a preservation of lean. But because lean doesn't translate necessarily to function, then they're to have to make better, better, which means they're going have to look at LDL, they're going to look at HbA1c, they have to look at insulin resistance, something metabolic. I think that's a challenge because you can only make things better, better, so much better, Meaning that if your LDL hits 70 with GLP-one alone, then what's better than better?

Speaker 3

You're already in a better range. Same thing with HbA1c and same thing with insulin resistance. GLP-1s do a good job on their own. So what are you going to show? So I think it's a question mark.

Speaker 3

So I'm going to end with what I think makes us different again and that is we're oral. And because we're oral, that doesn't matter what they show, because a small molecule, it's oral that can be combined with the future of weight loss medicines, which is an oral agent that's not a peptide, that's a small molecule. Then you'll be able to produce mass produce the drug more cheaply distributed much better when you're not looking for cold storage and that kind of stuff. And get the massive number of people that could benefit from a weight loss drug that is now a drug that is taking 99% of the fat away and leaving lean alone. So it's a true weight loss drug getting rid of the fat that's the enemy.

Speaker 2

Great. Thanks very much.

Operator

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

Speaker 3

I appreciate everyone who joined us on today's call. I look forward to updating all of you on our progress at our next investors call and stay tuned for the numerous catalysts that will be coming out over the short term. Thank you. Bye now.

Operator

The digital replay of the conference call will be available beginning approximately twelve p. M. Eastern Time today, May 8, by dialing 704-0529 in The United States and 8 internationally. You will be prompted to enter the replay access code, which will be 768200749. Please record your name and company when joining.

Operator

The conference call has now concluded. Thank you for attending today's discussion.

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Key Takeaways

  • In the Phase 2b QUILT trial, enobosarm plus semaglutide met its primary endpoint with a 71% preservation of lean body mass versus placebo, and the 3 mg dose achieved 99% lean-mass retention (p<0.001).
  • Secondary data showed a dose-dependent increase in fat loss, with the 6 mg dose delivering a 46% greater reduction in fat mass versus semaglutide alone, and combination therapy shifting total weight loss composition to over 90% fat.
  • On physical function, combination treatment produced a 54.4% reduction in patients experiencing a ≥10% decline in stair-climb power (62.4% at 3 mg; p<0.01), highlighting preserved strength in older adults.
  • Key upcoming catalysts include unblinded Phase 2b safety data and extension maintenance results this quarter, an FDA end-of-Phase 2 meeting in Q3 to align on Phase III design, and Phase I bioavailability data for a modified-release formulation.
  • Financially, R&D expenses rose to $3.9 m driven by the InnovusArm trial, with a net loss of $7.9 m this quarter and a cash runway into Q4, indicating the need for additional funding to support Phase III.
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Earnings Conference Call
Veru Q2 2025
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