Good morning, ladies and gentlemen, and welcome to Veru Inc.’s Investors Conference Call. All participants will be in listen-only mode. [Operator Instructions] After this morning’s discussion, there will be an opportunity to ask questions. Please note this event is being recorded. The statements made on this conference call that are not historical in nature, are forward-looking statements. Such forward-looking statements reflect the company’s current assessment of the risks and uncertainties related to our businesses. Our actual results and future developments could differ materially from the results or developments in such forward-looking statements. Factors that may cause actual results or developments to differ materially include such things as the risks related to the development of the company’s product portfolio; risks related to the ability of the company to obtain sufficient financing on acceptable terms when needed to fund development and company operations; risks related to competition; government contracting risks; and other risks detailed in the company’s press releases, shareholder communications and Security and Exchange Commission filings. For additional information regarding such risks, the company urges you to review its 10-Q and 10-K SEC filings. I would now like to turn the conference over to Dr. Mitchell Steiner, Veru Inc’s Chairman, CEO and President. Please go ahead.

Thank you, operator, and good morning. This is Dr. Mitchell Steiner, Chairman, President and CEO of Veru Inc. And joining me are Michele Greco, CFO and CAO; and Philip Greenberg, Executive Vice President, Legal. Today, we’ll provide an update on the clinical development of our drug pipeline; commercialization of our products, as well as provide financial highlights for the second fiscal quarter 2018. Veru, a urology and oncology biopharmaceutical company is executing on its strategy for near-term revenue growth by having several drugs under clinical development progressing at the same time to ensure that we have several NDAs and commercialize multiple drugs in urology and oncology. In fact, we expect to file three NDAs for four drugs over the next 18 months. First, we have a proprietary new slow release granule formulation of Tamsulosin in two drug products, Tamsulosin DRS, extended release granules for oral suspension and Tamsulosin XR capsules. These two new drug formulations address the administration concern of FLOMAX. FLOMAX has a food effect, which means that according to the label that a greater amount of drugs up to 70% more gets rapidly absorbed with results in the higher than 30% higher blood drug levels when given on an empty stomach. As a precaution to prevent unwanted side effects like dizziness, fainting, orthostatic hypotension, the FDA label states that FLOMAX must be given 30 minutes after a meal. Our novel slow release granule formulation does not appear to have a food effect based on two bioequivalency studies that we have already conducted. This lack of a food effect provides a major clinical advantage for Tamsulosin DRS granules and Tamsulosin XR capsules in both Drug Administration and compliance, compared to FLOMAX and its current generics. Furthermore, Tamsulosin DRS granules has an additional important benefit of providing an alternative for…

Thank you, Dr. Steiner. As we’ve mentioned in the past and the reasons for our diversification strategy, we’ve seen a marked decline in public sector volume over the past seven quarters for the FC2 product. The decline experienced in fiscal 2018 is due to the timing of public sector tenders and lack of orders from our two main customers in Brazil and South Africa. As Dr. Steiner mentioned, we’re optimistic about the upcoming Brazil and South Africa tenders, as well as the new revenues from our U.S. FC2 marketing and selling efforts. Looking at our fiscal Q2 results. FC2 unit sales totaled $4.1 million, which is 9% lower than the $4.5 million from Q2 2017. Net revenues for the quarter totaled $2.6 million, an increase of 7% from the prior year quarter. Gross profit decreased 6% to $1.2 million for margin of 47%, compared with $1.3 million from margin of 53% in the prior year quarter. The decrease in a gross margin percentage is primarily due to the unfavorable impact at the currency exchange rate and our cost of goods. Operating expenses increased $2 million from $3.9 million for the prior year quarter to $5.9 million. The increase in operating expenses was primarily due to increased research and development costs for our clinical development programs of $900,000, increased salaries related to our U.S. commercial team, increased corporate personnel and severance expenses. The bottom line result was a net loss for the quarter of $3.8 million, or $0.07 per diluted common share, compared to a net loss of $1.8 million, or $0.06 per diluted common share for the prior year quarter. Now for the results for the six months period ended March 31, 2018. Unit sales totaled $8.5 million, which is down 22% from the prior year, up 10.9 million units.…

Thank you, Michele. We’ve established a foundation to make Veru a leading urology and oncology biopharmaceutical company. We have several near-term and mid-term products progressing. At the same time, we have multiple shots to have applications for approval of new drugs filed and launched in urology and oncology. We aspire to file at least one NDA each year for the next five years. This will provide the engine for growth as we continue to develop and plan to commercialization of new drugs and commercialize the company’s existing products in our portfolio. We’re also looking forward to advancing VERU-944 for the treatment of hot flashes in men who have advanced prostate cancer and are in hormone therapy into a Phase 2 clinical trial soon. We’re excited VERU-111, is a novel targeted oral anti-tubulin therapy for multiple types of cancer, and look forward to starting the Phase 1/2 clinical trial this year for the treatment of prostate cancer, as well as to share additional preclinical data at the multiple future scientific meetings. We will drive shareholder value through the lower costs and expedited clinical development for large market opportunities in urology and oncology. We’re committed to becoming a leading urology and oncology company. With that, Ill now open the call to questions. Operator?

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Our first question will come from Kumar Raja of Brookline Capital Markets. Please go ahead.

Hi, good morning. Thanks for taking my question. So first, I want to understand how the – this change from fixed to variable? What is the timing that it will take impact? And how it is going to impact the marketing efforts and when do you see the result from those efforts? And as well as the timing of the tenders for Brazil and South Africa, I heard that you will hear about it first in early December, is that right? Is that the timing for both Brazil and South Africa? How does that impact timing of the revenues?

Great. So your first question – thank you, Kumar. I appreciate that. The first question is the – provide a little bit more clarity on the fixed versus variable. So as the strategy – the initial strategy was to look at six different markets – market access channels and see which of these channels would have traction. So examples would be, would you use telemedicine? Would you use salespeople? Would you do online? Would you go after just public health? Would you go after 340B clinics. So we went after a lot of different ways to see where we could have traction in the U.S. market. Our hunch all along was based on the Affordable Care Act, where the insurance companies, both private and public had to pay 100% with no co-pay that having a prescription may be the best way to do it, we just didn’t know. So, as I told you in the last call, it looks like all the six channels generated revenue and particularly the sales force. Now the sales force was small. We didn’t want to put a lot of money behind it. So when we say fixed costs, we had to pay salaries, we had to pay bonuses, we had to pay for their expenses and their selling expenses, and so that was for 12 people. And then what happened, it became very, very clear that this was a way to go. Now next decision it is, do you expand it? Well, to expand it, you can to go from 12 to 40, or 12 – from 40 to 100, it’s not what we were intending to do alone. So the idea was can we convert those 12 fixed folks into a variable model in which we have a deal with a distributed kind of like what we did with PREBOOST with Timm Medical and go with a…

See, it’s not a distributor, it’s a service agreement.

So it’s a service agreement with salespeople, which we have initially 40 that would then be expanded to 100 by next year. And the difference there is that, they’re being compensated as they sell the FC2 product and we are not providing them salaries and bonuses and all this other stuff that you would in the fixed situation. So we essentially converted the fixed into a variable, so that we can have more people out there selling. We get – we take advantage of the revenue that comes in for our bottom line and when – and we have less exposure to this fixed cost. So when would – the other part of your question is, when would you do that? The answer is, we’ve already done it. We started in February with an initial pilot launch and we’ve expanded that appropriately and we’re very, very pleased with the results of this approach. And I think it will affect our overhead, because we got rid of the fixed. And as we sell, we will be paying for the sales force that are out there selling for us. Second question was related to the timing of South Africa and Brazil. As you know, with governments, you never know a 100%. But what I can tell you that we know right now is that, Brazil is expected to – Brazil is a Dutch auction, so we expect that tender, which is 50 million unit order to be decided over the auction to happen sometime in the June timeframe. And the hope is that, we will hear something in June, July, so that has not changed. And then the second one, South Africa. South Africa, we’ve already applied. They’ve already announced their tender, 40 million units a year for three years. And based on what they have guided us, we’re looking for a June, July answer as well. So it’s both about the same time. In terms of the timing of the orders, all I can tell you is, we know that Brazil and South Africa are running out of product. And so I think, that – that’s good for us. We just have to see how that translates into now orders versus soon orders.

And so when do you see these results coming in, in terms of increasing revenues, especially the U.S. marketing efforts? When do you see the results for that?

I’ll answer and I’ll have Michele answer as well. So we’re seeing results now, and so we’ll be able to provide more information via next call. But Michele, would you like to comment?

I would agree with Dr. Steiner. We’re seeing results from the U.S. marketing efforts and we’re going to continue to see that and that’s going to continue to increase. And once the tenders are announced and as orders get placed, we’ll see those orders will probably come in a month or so after the tenders get announced.

And I also…

So we’ll see it [Multiple Speakers] summer.

Okay. I also had a question for VERU-111. So a lot remains to be done before you guys can go ahead and file the NDA. Do you guys have enough clinical drug supply for starting the clinical trials? And also the potential in other oncology indication like what are your plans for that?

Yes. So I think, you meant to say IND, not NDA, so for VERU-111, right? So when we file the IND, correct, or you think it’s not [Multiple Speakers]

That’s right, yes. That’s IND, yes..

Okay, IND, good. I just want to make sure I answered the right question, yes. So the answer is that, we’re on target to file the IND by December time, so that we can have a third quarter start of the trial. So we have drug, we have drug supply. We have to create a – it’s a brand-new drug. So we have a manufacturer that’s fully GMP. We’ve got plenty of drug to start the trial. The initial thought was that we would start the trial in men with metastatic castration-resistant prostate cancer. They have failed abiraterone and enzalutamide and they could have failed, at least, one taxane, whether it’s cabazitaxel or docetaxel. So the thinking behind that is, because PSA response, which means greater than 50% reduction in PSA over 12 weeks or three months is a pretty good predictor of activity that we would be able to start seeing within three months. These patients that are being rolled into the trial – enrolled into the trial some of the efficacy activity and, of course, we’re looking at safety. And so the thought was get that done with prostate cancer first, because then you can make a comment on safety and then even make a comment on efficacy. Even though the medical oncologist that we’re working with and Hopkins is – it looks like it will be the lead group – that they’re telling us that this should have activity in other taxane sensitive, quite frankly, taxane sensitive that became taxane resistant tumor types. And you will be seeing some new data coming out of ASCO showing you some of the additional tumor types that we have activity. That – if we did a study, where everybody came in, then we wouldn’t have enough of any one tumor type that we saw a signal. So with that said, get past the prostate one, get into Phase1/2, get into 2 and then begin to expand VERU-111 into other tumor types, we’re having an oral anti-tubulin therapy would be preferable. So that would be the plan. Our hope is that, by the time we start showing the prostate cancer results, particularly the efficacy that we’ll be in good position for a potential large pharmaceutical partnership and that certainly would influence the number and types of additional trials that we would do. But we can certainly broaden the market.

That’s very helpful. Thank you so much.

Thank you.

Our next question will come from Yi Chen of H. C. Wainwright. Please go ahead.

Hi, thank you for taking my question. Regarding VERU-944, can you provide some color as to when can we expect to see the Phase 2 protocol? And how many patients will be enrolled once you start in July? And when can we expect to see the top line results? Thank you.

Yes. So I had made – so the question is on VERU-944, which is the product cis-clomiphene, which is about greater than 98% pure cis-clomiphene, which is in a nonsteroidal oral estrogen for the treatment of hot flashes in men on androgen deprivation therapy. The question is when will we see the protocol. So what I think guided in the calls that we plan to file the IND this month. What I will – once the FDA has had a chance to review the protocol, which we have to give them 30 days, then at that point we’ll provide full details on the protocol and you can even go to clinicaltrials.gov. And I think, there’s information that’s registered there to give you some specifics on the protocol once we move forward with it. At a very high-level, we’re looking at three doses versus placebo. And the endpoint is the – looking from the baseline to week four and week 12, the number of or the frequency of moderate to severe hot flashes and what that change is. The reason that’s important is, because this is, in fact, the same endpoint that the FDA uses for postmenopausal women that have hot flashes and drugs that have been approved for those indicate – for that indication And so – the FDA has allowed us to use the same endpoint, as mentioned in there – I think it’s a draft guidance for treatment of hot flashes in women with estrogen products and that guidance is as of 2003. So that’s the end point. It’s a 12-week treatment period. So we know it’s a short study. And the results we’re expecting in the first part of 2019 and again, 120 patients total of approximately 120 patients will be in the study. So we’ll give you more information. So in summary, then it’s a 120-patient study enrolled in four arms, three doses versus placebo, endpoint similar to postmenopausal women, hot flashes and the date is expected first part of 2019.

Got it. Second question regarding Tamsulosin DRS NDA filing, is this still on track to occur in the second-half of calendar 2018?

Yes. So we’re still on track and we’re still on track. One of the things I keep telling folks is that, we ended up getting some interesting news when we did the first two bioequivalency studies, and that sort of changed our approach. Initially, we thought we’d come up with a alternative to FLOMAX that will allow patients with dysphasia to have an opportunity to take granules and that was a big niche market and that alone would have been quite profitable. During the two studies, we found out, it turns out that this new slow release technology, in fact, change the attributes of the drug product by providing us now a drug that doesn’t have a food effect. And so now that you don’t have a food effect, then we said, well, gosh, not only could we be beneficial in patients who cannot swallow, but we now have access to the 22 million prescriptions that are written a year for FLOMAX and its generics and providing something that doesn’t have a food effect could have advantage – clinical advantages both for administration, because patients never listen, tell them to take it on a full stomach, they take it at bedtime and they stand up and get dizzy and they could fall down and break their hip or something of that nature. So to be able to have something that will change the administration and compliance would be a big deal. So we added a capsule. So now the NDA has two drug products. The first drug product will be the slow release granules and then we took those slow release granules and stuck them into a capsule. And so we just want to make sure we kind of do it all right. And we’re on track and we’re excited with this new change, because I think this is going to make this even more successful drug and needed in the marketplace. And just to also add, it also turns out for the alpha blockers, which is the class that Tamsulosin falls under. There are no granule formulation. So it’s not just we would provide something for Tamsulosin, which is 85% of the market. But it means 100% of the market could be served by having a granular formulation.

Okay. Thank you.

[Operator Instructions] Our next question will come from John Costello, shareholder. Please go ahead.

Okay. Yes, thanks. Dr. Steiner, just kind of as a follow-up to that. Do we have a hard start date for the Tamsulosin Phase 2 trials, which I was – I think, would occur this month sometime in May. And also just in your opinion what are the chances for success in the second phase of the Tamsulosin trial?

Right. Well, John, thank you. Good to hear your voice. So to answer your question, so we’re – this is – and I’m saying this just for purposes of other people listening to be sure we’re clear. So this is a bioequivalent study. And the bioequivalent study means that you have to show that you have the same drug levels with your new formulation, as compared to the reference, which in this case is FLOMAX. We just have the added benefit of comparing it to FLOMAX Fed and Fasted, because FLOMAX has a food effect. We want to match FLOMAX Fed, which is the safer version of it, okay. We have done Phase 1 Phase 2, but the way you think of Phase 1 and Phase 2, don’t think of it as a Phase 1, Phase 2 as in clinical development, the Phase 1 being trial 1, trial 2. Trial 1 was to pick a formulation of which we picked the formulation that showed us that we didn’t have the food effect and we match the general attributes of the PK or the pharmacokinetic of FLOMAX, Fed And Fasted, and then that’s what we found that we didn’t have a food effect. Phase 2 was really the second bioequivalancy study in which we announced we hit bioequivalence for drug levels both Fed and Fasted versus FLOMAX Fed and we were excited about that so that met that, but we did not hit on Cmax, Cmax means how quickly did the drug get in initially and we were off. And so the next trial that we are doing, John, is the trial where we fix the Cmax and the AEC is already in place and what is happening in terms of the timing and the question is, for that trial which…

Okay, thanks. That sets clarity.

Thank you.

[Operator Instructions] Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Dr. Mitchell Steiner for any closing remarks.

I appreciate you joining us on today’s call and I look forward to updating you all on our progress at the next investors call. Thank you for the question, I appreciate it and have a good day.

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